Lack of investment is jeopardising the chances of food companies recovering from the cost of living crisis, according to a new survey by the FDF.
It found that despite business confidence rising in the first quarter of the year, thousands of businesses were holding back on plans to invest, as labour shortages and supply chain disruption continued to grip the sector.
The FDF’s State of Industry survey for the first quarter of 2024 found half of food and drink businesses planned to maintain low levels of investment in the coming year against a backdrop of significantly lower levels of investment in food and drink manufacturing.
Brexit, the pandemic, geo-political unrest, extreme weather conditions and inflationary pressures have resulted in investment in food and drink manufacturing falling by 30% since 2019.
The FDF said the survey showed many businesses were postponing or cancelling investment projects and diverting funds instead to day-to-day operations.
In 2023, the industry’s investment was more than 30% lower than in 2019, contrasting with the UK as a whole, where investment was over 5% higher.
The report predicted in the medium term, stubborn labour shortages and shipping disruptions would continue to put upward pressure on prices, while geopolitical and climate events remained significant risks to food prices.
It called for greater collaboration with the government to help unlock higher levels of private sector investment, which it said was vital for stimulating growth and safeguarding the UK’s long-term food security.
“Investment in our sector is down by a third compared with 2019, and our State of Industry report has revealed that around half of food manufacturers have no intention of increasing their investment levels this year,” said FDF director for sustainability and growth Bal Dhoot.
“If we are to build a sustainable and resilient food supply chain which supports the economy and feeds the nation, we need government to work with us to help foster a climate which encourages greater capital expenditure and investment in innovation.
“Our members, particularly the mid-sized businesses, continue to face some market uncertainty caused by labour shortages, and the impact of poorly designed and implemented regulations. This is having dire unintended consequences for businesses by adding costly and unnecessary burdens to supply chains.”
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