Food and drink firms target international customers as Britain leaves EU

Food and drink firms target international customers as Britain leaves EU
Credit: Shutterstock.com/ Alex Kolokythas Photography

As Britain leaves the EU, more food and drink firms in England and Wales are targeting new international customers.

This is according to the Food and Drink Report 2017 from Lloyds Bank Commercial Banking.

It found that the number of firms investing to secure new international customers has leapt from 55% last year to 69% in 2017.

Europe remained the most common target, with two fifths planning to enter new markets inside the EU, while 39% of firms are targeting new markets outside of it.

Firms said their primary export targets were Western Europe, the Far East and Asia (both 43%), Australia and New Zealand (41%), followed by North America and the Middle East (both 36%).

More than a quarter of food and drink firms said they planned to export for the first time in the next five years.

But firms said there were challenges to exporting including regulatory issues, political uncertainty at market destination, international regulation and domestic regulation acting as barriers (all cited by 54% of companies).

Growth

Food and drink firms hold more ambitious growth plans than they did last year, forecasting growth of 21% of turnover over the next five years – up from 19 % this time last year and 16% in 2015.

Investment plans remained fixed however, with almost half of firms planning to invest the same or more than last year over the next 12-24 months and only 29% saying they would invest less.

Popular routes to growth include developing new products (57%), growing sales in the UK (51%), creating jobs (48%) and entering new EU markets (43%).

Funding ambitions

Firms plan to fund growth by creating efficiencies through cost cutting (cited by 53% of respondents).

The number of firms using cash flow/working capital finance has grown from 31% in 2016 to 48 % in 2017.

While producers are also planning on using cash reserves (up from 32% in 2016 to 42% in 2017), almost a third of companies are considering joint ventures and 31 % are considering debt to fund business growth (up from 15% this time last year).

Employment uncertainty

Firms said that rising labour costs were the industry’s biggest challenge over the next five years, mentioned by 48% of firms, up from 25% last year.

Despite that, 44% of all companies still planned to create jobs over the next five years, up from 24 % last year.

If the job creation plans come to pass the sector will create more than 95,000 new jobs over the next five years.

Businesses are investing in skills too with 51 % investing in skills development, up from 34% this time last year.

Supply chain

Leaving the EU remains the biggest threat to supply security in the next five years cited by 41% of firms.

Concerns about ingredient security have also increased with 36% saying it is one of the biggest challenges for the industry, up from 26% last year.

But despite challenges, 78% of firms said they would pay a higher price to primary producers in the UK to guarantee supply security and maintain the provenance of their products.