Confidence in the UK food and drink manufacturing sector has sharply declined, with business sentiment dropping to -47% at the end of 2024, down from -6% the previous quarter, according to the latest State of Industry report from the Food and Drink Federation (FDF). The downturn comes as manufacturers face rising energy and commodity prices, increased National Insurance contributions, and new Extended Producer Responsibility (EPR) packaging rules set to cost the industry £1.4 billion annually from October.
In response, the FDF has launched Ingredients for Growth, a plan to drive investment, productivity, and innovation in the sector. The report urges the government to allocate more R&D funding to food and drink manufacturing, helping businesses develop new products and transition to net-zero. It also calls for a co-developed workforce and skills strategy with Skills England to address talent shortages, as vacancy rates in the industry are more than double those in broader manufacturing.
The FDF also pushes for a simplified R&D tax credit system to encourage investment in technology and product innovation. It argues that the £1.4 billion collected annually from EPR should be ringfenced for recycling infrastructure rather than absorbed into local authority budgets. The report highlights the need for a more strategic approach to EU trade to counter a 30% drop in exports since Brexit and calls for regulatory simplifications to ease the burden on businesses, particularly SMEs.
FDF Chief Executive Karen Betts warned that the sector risks stagnation without decisive action. She stressed that a strong food manufacturing industry is essential for UK food security, agricultural support, and economic growth. She said the UK has the potential to become the most competitive and innovative food and drink market in Europe but needs government support to remove barriers and accelerate growth.