In the second of its new quarterly business confidence surveys, the FDF found that more than three-quarters of manufacturers expect input prices to increase further still this year. Already in 2018, 62% of those polled reported higher ingredient prices, while 61% said packaging costs were rising and 51% flagged increased energy costs.
Alongside ingredients costs and exchange rate volatility, the UK’s trading relationship with the EU after Brexit and any transition deal were the top three concerns flagged by the industry.
Despair over no-deal departure
The prospects of a no-deal scenario seemingly rose this weekend, with officials warning that the scales are tipping toward this outcome.
An article published in the Sunday Times saw Brexiteer and International Trade Secretary Dr. Liam Fox warn that the changes of no-deal are now 60-40, blaming the “intransigence” of the EU. Meanwhile Bank of England governor Mark Carney told the BBC that the chance of a no-deal Brexit is “uncomfortably high”.
Leaving the EU without transition arrangements in place would put strain on the food industry’s ‘just-in-time’ supply chains and some have warned that this could lead to food shortages. Brexit Secretary Dominic Raab has said that the government is putting plans in place to ensure an adequate food supply.
British-based food and beverage businesses are also putting contingency plans in place in the event that the UK crashes out of the EU without a deal. The FDF revealed around 45% of businesses said that they had developed back-up plans due to a lack of certainty around trade arrangements from March 2019. However, over 70% of SMEs said they hadn’t.
“The shadow of a ‘no deal’ Brexit looms large over business confidence amongst the UK's food and drink manufacturing industry. This should come as no surprise – there are so many crucial questions to which businesses need answers,” FDF chief executive Ian Wright explained. "Government must start providing the clarity needed to navigate unchartered waters as we look to prepare for our future outside the EU.”
Resilience remains
While UK food makers face considerable uncertainty around Brexit, the FDF survey also highlighted that manufacturers “remain resilient”, Wright added.
Respondents suggested general business confidence had remained static during the last two quarters.
Identifying opportunities moving forward, UK food and drink manufacturers highlighted increased domestic demand, with 54% stating that they have seen increased UK volumes.
Many companies also said that planned investments in machinery and innovation are expected to drive growth. Forty-two percent of respondents said they intent to increase launches of new products to propel their businesses.