Food and drink manufacturers are reporting an increase in costs as a result of stockpiling ahead of a possible ‘no-deal’ Brexit.
The Food and Drink Federation’s (FDF) latest business confidence survey reveals that over a third (38%) of food and drink manufacturers are reporting cost increases.
With less than five months to go until the UK is scheduled to leave the European Union (EU), FDF’s quarterly surveys have shown a significant decline in business confidence amongst food and drink manufacturers during 2018.
Economic uncertainty has seen net confidence amongst food and drink manufacturers decrease by 21% when comparing results reported in Q1 with those reported in Q3.
When looking ahead to 2019, two thirds of businesses identified future tariff implications as a risk to the business.
Just under 60% of businesses surveyed thought business investments across the overall UK economy would fall in 2019, while more than 96% expect to see rising input prices.
For small and medium-sized enterprises (SMEs), who make up 97% of the UK’s food and drink manufacturing sector, retail market consolidation was one of the top three barriers expected to impact the success of their business in 2019.
This follows the recent takeovers of Booker by Tesco, Nisa by the Co-op, and the proposed merger of Sainsbury’s and Asda which presents some concerns for UK manufacturers.
More than three quarters (79%) of businesses FDF spoke to reported increased ingredient costs as the biggest impact on their businesses in Q3, while 71% of those polled cited increased packaging costs.
Ian Wright CBE, FDF chief executive, said: “These results tell us just how seriously the food and drink industry, the UK’s largest manufacturing sector, takes a ‘no-deal’ Brexit. It is a grisly prospect to which we edge closer every passing day.
“The announcement from the Chancellor – with measures to support productivity, exports, enterprise and investment – offers some respite for our SME food and drink manufacturers.
“But there is significantly increased worry across the sector following the announcement of the Chancellor’s new tax on plastic packaging.
“This will undoubtedly place many more financial burdens on UK food and drink manufacturers – that loads on cost at a time when just under three-quarters of our members report that their packaging costs are increasing. The storm clouds are gathering.”
The business confidence survey can be found here.