The Food and Drink Federation’s latest second quarter report has revealed the majority of businesses in the region are preparing to make investment into their operations, but confidence has decreased by 8%, amid notable ongoing regulatory and economic challenges, writes Neill Barston.
As previously reported by Confectionery Production, the sector has endured notable tests in recent years, with high levels of inflation resulting in price spikes within the sweets and snacks industry that have impacted on retail sales, particularly within premium brand segments.
While the UK economy had been showing signs of recovering in recent months, the latest national figures show a rise in inflation to 2.2%, with this figure being higher within the retailing sector, as the price of ingredients, energy and logistics costs remain elevated.
The drop in confidence within SME British businesses is the first time this has occurred since the second quarter of 2023, with around half of companies surveyed expecting to keep their present levels of research and development, and a similar result (56%) of those firms looking to make investment in machinery.
However, economic uncertainty and regulatory uncertainties – which have intensified under additional Brexit regulations in the past few years, has seen levels of export reduce- including within the confectionery sector, as companies struggle with the additional red tape and physical additional costs of delivery to mainland Europe.
Despite this, the FDF asserted that its latest study had indicated that the industry had “turned the corner after the policy turmoil and external shocks” that had prompted a 30 per cent drop in investment since 2019.
Notably, its State of Industry report highlights that reforms to the Apprenticeship Levy would aid the sector in addressingskill gaps and labour shortages. Over half of manufacturers would like to be able to use the Levy funds for engineering conversion modules or business improvement techniques.
Furthermore, the study reveals that delivering sector innovation and adopting new technologies are critical for economic growth, and to safeguard the UK’s long-term food security. Notably over one third of manufacturers plan to increase their R&D spend over the coming year.
The report also finds that businesses remain concerned about policy and regulatory uncertainty, and non-tariff barriers could risk denting the industry’s export competitiveness- which has been reflected by our publication’s own reporting, with many small and medium sized companies within the confectionery sector in the UK either significantly scaling back, or ceasing to export to the rest of Europe due to the burden of additional post-Brexit costs.
Balwinder Dhoot, Director for Sustainability and Growth, The Food and Drink Federation said: “Despite investment in our sector being down by a third compared to 2019, it’s encouraging that manufacturers are planning to increase or sustain their investment this year. A well-crafted Industrial Strategy – working in partnership with the UK’s largest manufacturing sector – will also allow us to seize investment opportunities and tackle some of the nation’s critical challenges around food security, health, productivity and net zero. It is crucial for government to help establish a stable business environment that removes the burden of unnecessary and costly regulation and bureaucracy.
“We are pleased to see a renewed focus on improving UK-EU relations and barriers to trade with this significant partner. Providing targeted support for smaller businesses – who make up 97 per cent of our sector and who are disproportionately impacted by these costs and pressures – must be a priority. This approach will help make the UK the best place to invest and innovate in food and drink production.”