The government needs to create a stable regulatory environment to ensure food and drink producers have the confidence to grow their businesses in the wake of the Budget.
That’s according to the Food and Drink Federation’s (FDF) latest State of Industry report, which tracks business confidence and trends in the UK’s largest manufacturing sector.
The report, which covers Q3 2024, found that business confidence remained at the same level as Q2 (-6%) with many food and drink manufacturers looking to boost investment in the next 12 months. Two-fifths of businesses plan to increase their investment in R&D (40%), plant and machinery (44%), and skills and training (44%) in the coming year.
However, the current business environment is creating obstacles, the report says. More than half (53%) of manufacturers say they’re likely to limit investment over the next 12 months due to uncertainty about upcoming regulation. For example, the upcoming Extended Producer Responsibility legislation, recent National Insurance employer contribution changes and minimum wage increases taken together will add billions of pounds in additional costs for producers in 2025.
Other major barriers facing businesses include taxation (31%) and lower financial returns due to a less favourable business environment (31%).
Consequently, FDF is calling for the government to create a more supportive and stable business environment, and for guidance around current and future regulations. These measures, it says, will give food and drink producers the confidence they need to unlock a £14bn untapped growth opportunity in the UK.
The Budget’s potential impact on stifling growth was also highlighted in a separate flash survey undertaken in November. This found that nearly three-quarters (71%) of food and drink manufacturers believe the Budget will have a negative impact on employee pay. With unfilled vacancies rising to 5.1% in Q3 2024, and a quarter (25%) of businesses highlighting that labour and skills shortages will limit their investment in the year ahead, FDF again stressed the need for government to provide clear guidance and to listen to input from business on new employment regulations as soon as possible.
Balwinder Dhoot, director of industry growth and sustainability, The Food and Drink Federation, said: “Investment is vital to the long-term health and resilience of our industry, as well as to countering inflation. While it’s positive to see businesses planning to boost their investment in UK production, this will have been impacted by raised costs in the budget.
“With businesses facing billions of pounds of additional tax and regulatory costs next year, we urge government to double down on its growth mission. From removing barriers to trade, to reviewing regulation and planning rules, adopting a more collaborative relationship with business, government can do more to boost business and consumer confidence, and drive investment.”
