Unlocking investment key to solving food and drink manufacturing’s £14bn productivity gap, new research finds

There’s an untapped £14bn growth opportunity for the UK food and drink manufacturing industry¹, but more support to drive investment in technology, data and skills is needed to unlock this potential, food and drink manufacturing leaders will announce at the inaugural Food and Drink Investment Summit today. A new report, Future Factory: Supercharging digital innovation in food and drink manufacturing, released by the Food and Drink Federation (FDF) in partnership with strategic delivery consultancy Newton, has found that while investment in food and drink manufacturing has more than doubled over the past 20 years, other industries have seen higher rates of growth. This is because the current business environment is creating needless obstacles for food and drink businesses.

To help overcome these obstacles and unlock the investment needed to futureproof food and drink manufacturing, the sector launched a new Food and Drink Technology Taskforce at the Investment Summit, attended by Secretary of State for Environment, Food and Rural Affairs, Rt Hon Steve Reed MP, and Minister for Industry, Sarah Jones MP. Bringing together industry, technology providers, academics and financial organisations, the Taskforce will see the sector drive new initiatives to support uptake of technology across food and drink manufacturing, as well as working with government to create the conditions needed to support the industry’s growth.

Food and drink is the UK’s largest manufacturing industry, with more than 12,500 businesses employing half a million people in every corner of the UK. As well as feeding the nation, the sector contributes £38bn a year to the economy. However, while the UK has a strong position on the global stage, particularly for its product innovation, there is still a significant opportunity in technology innovation to achieve the productivity levels seen in other nations and similar advanced manufacturing sectors.

Greater investment in automation, robotics, AI, digitisation and data analytics is a huge opportunity for the sector. Using this technology to drive greater productivity can help unlock the sector’s economic growth potential, securing its competitive edge both at home and internationally. Yet, while three quarters (75%) of food and drink business leaders see the benefits of these technologies, there are barriers to seeing the adoption of these through.
With UK food and drink manufacturers operating in a fast-paced and highly competitive environment, businesses typically expect a return on investment within 18 months to two years. This can make the business case for investing in innovation more difficult compared to other advanced manufacturing industries – in particular for the industry’s 12,000 SMEs which make up 97% of the industry.

While advances in technology and adapting business models are helping industry overcome this complex challenge, government can play a key role in supporting this mission by ensuring good regulation within a stable and predictable regulatory environment. Creating the right environment for investment will pay dividends – every £1 invested in the food and drink manufacturing has generated £9 of value to the wider economy over the last 20 years².
By cementing food and drink’s position as advanced manufacturing, the government’s  Industrial Strategy can work in partnership with the new Taskforce, across the supply chain and with retailers to create the conditions in which investment can flourish, including creating a ‘Food and Drink Sandbox’ to pilot new initiatives.

Karen Betts, Chief Executive, The Food and Drink Federation, said:

“The UK has one of the most efficient and sophisticated food industries in the world, with shoppers everywhere able to choose from a wide range of nutritious, delicious and exciting food and drink every day, while prices remain below the European average. However, like other advanced manufacturers, the food and drink sector is facing into a range of challenges, from decarbonisation and digital transformation, to public health and supply chain resilience. To ensure the UK’s food and drink manufacturing industry stays at the cutting edge of future technologies, can keep prices competitive, create more skilled jobs on higher wages, export more, guard against food insecurity and realise billions of pounds in productivity gains, we need to double down on investment and innovation.

“The new Food and Drink Technology Taskforce will see business lead the way in finding the solutions we need for our sector, while working in partnership with government to create the right conditions to boost growth and investment and ensure our sector, which is rooted in communities up and down the country, is at the heart of economic renewal.”

Sarah Jones MP, Minister for Industry, said:

“The UK’s world-class food and drink manufacturing sector plays an integral role in driving growth to every part of the country.

“Increasing investment is a mission at the heart of this government. By working in partnership with industry, we’re looking to deliver long-term, stable growth that supports skilled jobs and raises living standards across the UK.”

Junaid Mujaver, Partner, Newton, said:

“The rate and range of digital innovation in food and drink manufacturing across the country is incredible. The UK performs well when compared to other economies, and has the potential to become world leading by better adopting Digital and AI. This report captures the key areas of focus for businesses, the sector and the wider food system to unlock this potential. This is the start of a collaborative taskforce, to work with the Industry to drive productivity.”

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Note to Editors

1. Source: Future Factory, Newton
2. On average, between 2004 and 2023, for each £1 invested, the food and drink manufacturing generated £9 in value added. Source: Future Factory, Newton

About FDF

The Food and Drink Federation (FDF) gives a voice to the food and drink manufacturing industry – the UK’s largest manufacturing sector. We contribute over £38 billion to the country's economy, supporting half a million jobs and driving growth at home and abroad. For more information on the FDF and the industry we represent, download our manifesto or visit www.fdf.org.uk.