Confidence among the UK’s 12,500 food and drink manufacturers is in “sharp decline”, as businesses are faced with a range of rising costs in 2025, according to data from the Food and Drink Federation (FDF).

FDF’s latest ‘State of Industry’ report found that business confidence had plummeted to -47% at the end of 2024, compared to -6% the previous quarter, as manufacturers responded to measures announced in the 2024 Autumn Budget and “turbulence” in global markets.

It also revealed that manufacturers faces “increased costs on many fronts” in the year ahead as inflationary pressures build and energy and commodity costs rise, stating that food and drink businesses would “bear the lion’s share” of the new Extended Producer Responsibility (EPR) packaging rules.

According to FDF, these financial pressures are impacting business confidence, so there’s a risk of industry investment flatlining and of growth stalling. However, it said that even in difficult context, Government and industry can partner to reverse this trend, and that if Government “pulls the right policy levers”, it can make the UK the most competitive and dynamic food and drink sector in Europe.

FDF has launched its ‘Ingredients for Growth‘ report, which outlines its plan to unlock investment in innovation, boost productivity and accelerate growth for UK food and drink manufacturing. The report sets out regulations that should be reformed or eradicated, as well as new policy initiatives that would drive growth in the UK food and drink sector.

Setting out 40 actions that Government can take to create the conditions for a food system that is green and adaptive, productive and innovative, the report highlighted six key industry asks to remove roadblocks to growth:

• Secure a fair share of the UK’s R&D spend for food and drink manufacturing, to support industry investment in new product development and healthier options for consumers and the transition to net zero
• Co-create a workforce and skills plan with Skills England to support our industry as we transition to a higher-skilled, higher-wage workforce
• Simplify the R&D tax credits system to help more businesses that are struggling to invest in technology to improve productivity and to innovate healthier products
• Ringfence the £1.4 billion annual cost of Extended Producer Responsibility (EPR) to ensure these fees are only used on improving the UK’s recycling infrastructure and not to fund local authority funding gaps
• Prioritise a more strategic approach to EU trade relations to revive falling EU exports, which are down more than a third since Brexit
• Simplify regulations and remove unnecessary red tape to help business, in particular our 12,000 SMEs, focus on growth and productivity

Karen Betts, chief executive of The Food and Drink Federation (FDF), said: “Everyone eats and drinks every day, and we need a strong food manufacturing sector to protect the UK’s food security, support British agriculture, and provide high quality, nourishing food at affordable prices.

“To do this, the UK needs to remain competitive and at the forefront of global innovation. However, this marked decline in business confidence shows that the Government and industry needs to take action now to ensure we have a thriving, productive food and drink industry into the future.

“We want the UK to offer a much more competitive environment for international and domestic investment in food and drink, to ensure we’re a world-leading destination for new products and ground-breaking research, as well as nurturing iconic brands that are loved here and abroad.

“But with pressures on industry mounting, Government must act to remove the roadblocks and accelerate growth. Together, we have the ingredients to make the UK the best place in the world to run a food and drink business.”