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Business confidence in the UK food and drink manufacturing sector falls

Business confidence is on a downward trajectory, according to a report from the UK’s Food and Drink Federation (FDF), which is suggesting 40 actions to help it pick up.

In March, the FDF released its Ingredients for Growth report, highlighting the steep decrease in business confidence among the sector’s players.

The membership organisation, which represents the industry’s manufacturers, has created 40 proposals on how the government can simplify laws to spur growth and investment in food and beverage (F&B).

The FDF’s latest quarterly State of the Industry report found confidence among the UK’s 12,500 F&B manufacturers declined sharply over the past year, dropping to -47% in Q4 2024 compared with -6% in Q3 2024.

“This marked decline in business confidence shows that the government and industry need to take action now to ensure we have a thriving, productive food and drink industry into the future,” said Karen Betts, chief executive of the FDF.

Rising costs and uncertainty

In 2025, businesses face rising costs, leading to manufacturers’ concerns over their growth plans.

Growing inflationary pressures are largely to blame for this confidence slump, with rising energy and commodity costs and increasing national insurance, wages, and packaging taxes affecting manufacturers’ strategies.

Announcements in the autumn 2024 budget have brought elevated uncertainty within the F&B landscape, causing producers to re-examine their planned investments.

The introduction of new rules and regulations, such as theExtended Producer Responsibility (EPR) packaging rules and the European Union (EU) Deforestation Regulations (EUDR), is also influencing brands and manufacturers. According to the FDF, the EPR packaging stipulations alone will cost food and drink businesses at least £1.4 billion annually from October 2025.

With company confidence dropping, there is a risk that industry investment will flatline and growth will subsequently stall. However, according to the FDF, cross-sector collaboration can be an antidote to these challenges and concerns.

Addressing concerns and ongoing challenges

In the report, the organisation sets out its recommendations to prompt investment in innovation, increase productivity, and promote growth in manufacturing.

With a focus on the legal landscape, the report outlines regulations that the FDF advises need to be reformed or eradicated, along with policy initiatives to accelerate industry growth. Among these are priority recommendations that the FDF believes will remove obstacles affecting manufacturers’ growth plans.

Firstly, the FDF wants the government to secure a larger share of the UK’s manufacturing research and development spending. It believes that setting aside a proportion of investment money will support industry NPD investment and launch healthier alternatives amid the better-for-you trend and transition to net-zero carbon emissions.

A simplified F&B system is also central to the FDF’s recommendations.

The organisation wants the UK to simplify regulations and “remove unnecessary red tape”. In doing so, it hopes it will help businesses focus on growth and productivity, particularly the country’s 12,000 small-to-medium businesses.

Investing in technology

The FDF also advises the UK simplifies its R&D tax credits system to help support companies struggling to invest in technology, improve their productivity and innovate healthier alternatives. According to the FDF’s latest findings, utilising technology can create a £14 billion growth opportunity.

With the upcoming EPR packaging rules anticipated to create £1.4 billion in annual costs, the FDF wants to ringfence these costs to ensure they only improve the UK’s recycling infrastructure.

“This money is for yoghurt pots, not potholes,” the FDF said.

Forming a robust relationship between the UK and EU is also a key priority.

The FDF hopes to see a more strategic approach to help improve struggling EU exports, which have decreased by over a third since the UK left the EU.

According to the EU, ensuring profitable trade by following the EU Border Target Operating Model and Single Trade Window is vital to achieving a solid strategic approach with the EU.