The Food and Drink Federation (FDF) has released its latest State of Industry report, finding that confidence “remained steady” among food manufacturers in Q3.

FDF said that there was an opportunity to drive growth among UK food and drink manufacturers as business confidence remained steady, but Government needs to create a “stable regulatory environment” to ensure this is maintained post-Budget.

The data, 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, more than half (53%) of manufacturers said they’re likely to limit investment over the next 12 months due to uncertainty about upcoming regulation. For example, the upcoming Extended Producer Responsibility (EPR) legislation, recent National Insurance employer contribution changes and minimum wage increases taken together will add billions of pounds in additional costs for UK food and drink manufacturers in 2025. Ensuring businesses have clearer guidance from Government and are appropriately consulted ahead of these, and any future legislation, will provide the confidence they need to drive investment, said FDF.

Other “major barriers” include taxation (31%) and lower financial returns due to a less favourable business environment (31%).

Budget to affect employee pay

The Government’s latest Budget could also impact the opportunity for business growth. A separate flash survey undertaken in November 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 said that it is vital that Government provides clear guidance and listens 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.”