A bombardment of taxation and regulation has led to a drastic fall in food industry business confidence, according to a damning report released by the FDF today.
The federation’s quarter four survey of members shows confidence has “plummeted”. Moves including the increase in employers’ National Insurance from April and the £1.4bn a year “packaging tax” in extended producer responsibility from October were cited as main factors deterring investment.
The survey, on the day Chancellor Rachel Reeves is to deliver her spring statement, reports a dramatic swing from a “steady” confidence score of –6% in the third quarter to a disastrous –47% in quarter four – the lowest confidence has been since the fourth quarter of 2022, when inflation was surging and the war in Ukraine was in its first year.
The FDF warned fresh inflationary pressures were gathering pace, as energy, labour and commodity costs rise and forthcoming regulations including EPR threaten to raise prices further.
Investment at risk of ’flatlining’
When businesses were asked what the leading factors constraining investment were, 54% mentioned the government’s taxation policies, while 52% said regulation would act as a barrier.
There was some positive news, with labour vacancy rates falling from 5.1% in quarter three to 3.6% in quarter four, the lowest rate since the FDF began tracking them in quarter one of 2022.
However, today’s report warned that industry investment was now at risk of “flatlining” unless the government reduced the burden of taxation and regulation.
The impact of EPR was highlighted as the biggest policy concern for more than half of manufacturers (58%), putting it above other areas such as trade policy (56%) and skills shortages (52%).
The report said that with manufacturers set to “bear the lion’s share” of EPR, and the first invoices due in October, growth was in danger of stalling completely.
The federation announced a list of 40 actions it wants the government to take to unlock investment. These include a massive increase in R&D funding for the food sector, introducing a workforce and skills plan, and providing tax incentives for companies to invest in innovation.
The document also calls for regulation to ring-fence investment from the money raised by EPR fees, as well as the simplification of other regulation and removal of red tape.
“Our nation needs a strong food manufacturing sector to protect the UK’s food security, support British agriculture, and provide high-quality food at affordable prices to everyone,” said FDF CEO Karen Betts.
“We want to remain at the forefront of global innovation. However, this drastic decline in business confidence shows that we need to take action now to ensure we have a thriving, and growing, food and drink industry.
“We have the opportunity to offer a much more competitive environment for international and domestic investment, and ensure that we’re a world-leading destination for ground-breaking research, so that we keep making products in the UK that are loved here and abroad.
“But with pressures on industry mounting, government must take decisive action, working with industry, to remove the roadblocks that are holding businesses back. Together, we have the ingredients to make the UK the best place in the world to run a food and drink business.”
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