Brexit jitters take their toll on UK food and drink industry - BDO

UK food and drink manufacturers are feeling the pinch of Brexit uncertainty but are striding ahead with investment plans to boost productivity, automation and new product development, according to new research published today by accountancy and business advisory firm BDO LLP.

BDO’s Food and Drink Report 2018, published today, found that 60 per cent of manufacturers surveyed are generally positive about the future of the industry, with three quarters (76 per cent) expecting revenue growth and 67 per cent believing order levels will increase in the next year.

However, looking back over the last three years, confidence among UK food and drink manufacturers has fallen 20 per cent and it is Brexit uncertainty which is posing the biggest threat to businesses for the year ahead.

According to the BDO report, concerns over skills gaps and labour are still a major concern to the industry and the UK’s relationship with the EU is only adding to the worry for business leaders.

Less than a quarter (24 per cent) of respondents believe the Government can negotiate a favourable post-Brexit environment for the industry and only 2 per cent think Brexit will have a positive impact on their business in the next year.

Martin Gill, lead partner for BDO LLP in Scotland, said: “Food and drink businesses are heavily reliant on overseas labour, with one in three workers being from the EU. The majority of firms we’ve spoken to believe that Brexit is likely to have a negative impact on attracting labour and skills in the future, and naturally that’s becoming a growing concern for them.

“It is crucial the government provides some clarity over our EU exit quickly and further supports an industry that is a huge driving force for our economy.”

Despite the challenges, firms still see a future worth investing in. For almost 90 per cent of food and drink manufacturers, productivity is a major focus area. Two thirds (63 per cent) are looking to make better use of staffing resources and half (54 per cent) are aiming to improve materials utilisation and reduce waste.

This is also driving investment in automation. According to BDO’s report, the objective for almost 50 per cent of all automation projects currently underway by manufacturers is to boost productivity.

Looking at where future growth opportunities will come from, more than half are turning to new product development to boost sales.

The two second biggest drivers of growth were refreshing existing product ranges and expansion into new domestic markets. Only 19 per cent see expansion into new export markets outside the EU as a priority.

Mr Gill added: “The focus on new product development highlights the value of innovation within the industry.

“The government has committed to boost spending on R&D incentives, however there is still a relatively low awareness around the range of activities that might qualify. I would urge that R&D tax reliefs should be high on the agenda for innovative food and drink businesses.”

BDO’s Food and Drink Report 2018 is available to download here.