Speciality-Food-Magazine-September-2024

5 specialityfoodmagazine.com compared to 2019, it’s encouraging that manufacturers are planning to increase or sustain their investment this year. Awell-crafted Industrial Strategy –working in partnership with the UK’s largest manufacturing sector –will also allow us to seize investment opportunities and tackle some of the nation’s critical challenges around food security, health, productivity and net zero. It is crucial for government to help establish a stable business environment that removes the burden of unnecessary and costly regulation and bureaucracy.” Balwhinder added he is pleased to see a renewed focus on improving UK-EU relations and barriers to trade with this significant partner. “Providing targeted support for smaller businesses –who make up 97% of our sector and who are disproportionately impacted by these costs and pressures –must be a priority. This approach will help make the UK the best place to invest and innovate in food and drink production.” F ood and drink businesses are persisting during challenging times, but more action from the government is needed to help them survive and thrive says The Food and Drink Federation (FDF). The Federation recently published its Q2 State of Industry Report, which tracks confidence and trends across the the UK’s largest manufacturing sector, with a third of respondents being large employers of more than 250 staff, 31% employing 50 to 249 people, and 25% being small operations of 10 to 49 employees. Businesses represented include bakery, soft drinks, grains/starches, crops, crisps and snacks, andmore. The latest analysis from the FDF reveals nearly nine out of 10 of those asked expect to maintain or increase investment levels to the end of 2024 – a signal the sector could well have turned a corner after suffering external shocks, such as Brexit, inflation and Covid, which have led to a 30% drop in investment since 2019. Findings show food and drink manufacturers are looking to invest 8 KEY THINGS THE FDF HAS NOTED IN Q2 • Investment is the key to long term success. The report says more needs to be done, though, to help the industry rebuild its margins. Despite inflation holding steady at 1.5% in July, and stabilising production and input costs remaining largely unchanged in the past year, there remains a lasting impact from the war in Ukraine and Covid, meaning we’re unlikely to see prices drop. For the industry to rebuild from a few difficult years, it needs to focus on investment and innovation. • Smaller businesses are under tremendous pressure, with confidence falling to –6% in Q2 – the first negative result for this portion of respondents in a year. Two thirds of those surveyed are worried about demand as inflationary pressures see a significant consumer shift to own- label and cheaper products. Smaller producers are most vulnerable to market changes, and typically operate on short term supply contracts and tight margins. • A large number of UK food and drinkmanufacturers (70%) are focused on growing UK sales, with NPD ranked as their second highest growth strategy. This demonstrates the desire of these businesses to prioritise innovation, which is incredibly important for competitiveness. Automation to address labour shortages has long-term, and are seeking out supply chains and ways of working that secure British food supply, while creating healthier andmore sustainable products for UK and global consumers. Innovation and adopting new technology are key for economic growth, the organisation said, noting that more than a third of those surveyed planned to increase their R&D spend during the coming year. The report also found businesses remain concerned about policy and regulatory uncertainty, and non-tariff barriers (such as health certificates) which could risk denting the industry’s export competitiveness. There is an opportunity, it added, to remove these obstacles, and drive domestic and international investment to increase growth, productivity and jobs. Balwinder Dhoot, the FDF’s director for sustainability and growth, said, “Despite investment in our sector being down by a third 8 key points fromThe Food & Drink Federation’s Q2 report Inflation, labour shortages and tricky EU relations are just some of the issues the industry has faced in the second part of the year increased, as has adopting new and existing technologies for greater productivity. • Priorities for industry with the new government include strengthening the UK’s relationship with the EU, alongside looking at employment and skills policies, and packaging reforms. Trade relations, the FDF said, are absolutely vital, and non- tariff barriers are hindering the waymanufacturers operate within the EU. Around 54% are impacted by administrative costs restricting foreign sales, 40% by export health certificates, and 24% by import health certificates. It’s becomingmore costly and time-consuming to operate outside of the UK. • Labour shortages stood at 4.9% in Q2, compared to 5% in Q1, remaining above rates in wider manufacturing of 2.6%, and UK-wide (2.8%), These skills shortages continue to have an impact at all levels, fromdistribution to the factory floor, engineering and management. • Of those surveyed, 58%would like funding prioritised for novel and alternative packaging, and 55% for resource footprint measurement and reduction. • 62% of respondents said they want to use Apprenticeship Levy funds for first line manager development, while 56% for business development techniques and engineering conversionmodules that allow them to upskill workers.