FDF launches ‘Ingredients for Growth’ to tackle sharp decline in business confidence among food and drink manufacturers

Confidence among the UK’s 12,500 food and drink manufacturers is in sharp decline, as businesses are faced with a range of rising costs in 2025, according to fresh data from the Food and Drink Federation¹. Its latest State of Industry report found that business confidence plummeted to -47% at the end of 2024, compared to -6% the previous quarter, as manufacturers respond to measures announced in the 2024 Autumn Budget and turbulence in global markets.

Food and drink manufacturers face increased costs on many fronts in the year ahead. Inflationary pressures are building, with energy and commodity costs rising, and government policies, such as National Insurance, piling further costs on manufacturers. Meanwhile, food and drink businesses will bear the lion’s share of new Extended Producer Responsibility (EPR) packaging rules, which will cost at least £1.4bn a year from this October.

These financial pressures are impacting business confidence, so there’s a risk of industry investment flatlining and of growth stalling. However, even in difficult context, government and industry can partner to reverse this trend. If government pulls the right policy levers, we can make the UK the most competitive and dynamic food and drink sector in Europe.

Today, FDF has launched Ingredients for Growth – its plan to unlock investment in innovation, boost productivity, and accelerate growth for UK food and drink manufacturing. The report sets out regulations that should be reformed or eradicated, as well as new policy initiatives that would drive growth in our sector in the UK.

Setting out 40 clear actions that government can take to create the conditions for a food system that is green and adaptive, productive and innovative, the report highlights six key industry asks to remove roadblocks to growth:

1. Secure a fair share of the UK’s R&D spend for food and drink manufacturing, to support industry investment in new product development and healthier options for consumers and the transition to net zero. With industry investment down 30.5% compared to 2019 ², it’s critical that food and drink receives its fair share of government funding and support to unlock innovation in the UK’s largest manufacturing sector.
2. Co-create a workforce and skills plan with Skills England to support our industry as we transition to a higher-skilled, higher-wage workforce. This would be an investment in communities in every place and region of the UK. With vacancy rates more than double those seen in wider manufacturing³, investing in skills is vital to plug this gap and to create new opportunities for both young people and those mid-career, in a key part of the everyday economy.
3. Simplify the R&D tax credits system to help more businesses that are struggling to invest in technology to improve productivity and to innovate healthier products. There’s significant scope to accelerate the adoption of technology across our sector’s 12,500 businesses, with a £14bn growth opportunity for the taking⁴.
4. Ringfence the £1.4bn annual cost of Extended Producer Responsibility (EPR) to ensure these fees are only used on improving the UK’s recycling infrastructure and not to fund local authority funding gaps. This money is for yoghurt pots, not potholes.
5. Prioritise a more strategic approach to EU trade relations to revive falling EU exports, which are down more than a third since Brexit⁵. The EU Border Target Operating Model and Single Trade Window are essential to this and to ensuring profitable trade with our largest trading partner.
6. Simplify regulations and remove unnecessary red tape to help business, in particular our 12,000 SMEs, focus on growth and productivity.

As the UK’s largest advanced manufacturing sector, employing around 500,000 people in every constituency, the food and drink manufacturing industry is uniquely placed to help the economy grow right across the UK. We can deliver this by creating more, higher-paid jobs, driving investment, growing export markets, and providing healthier choices for shoppers.

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

“Everyone eats and drinks every day, and we need a strong food manufacturing sector to protect the UK’s food security, support British agriculture, and provide high quality, nourishing food at affordable prices. To do this, the UK needs to remain competitive and at the forefront of global innovation. However, this marked decline in business confidence shows that that government and industry needs to take action now to ensure we have a thriving, productive food and drink industry into the future.

“We want the UK to offer a much more competitive environment for international and domestic investment in food and drink, to ensure we’re a world-leading destination for new products and ground-breaking research, as well as nurturing iconic brands that are loved here and abroad. But with pressures on industry mounting, government must act to remove the roadblocks and accelerate growth. 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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Note to Editors

Download the Ingredients for Growth report.

1. Source: FDF State of Industry report Q4 2024
2. Source: FDF State of Industry Report Q2 2024
3. Source: FDF State of Industry Report Q4 2024. Vacancy rates are at 5.1%, compared to 2.4% for wider manufacturing
4. Source: Future Factory report, Newton
5. Source: FDF Q4 2024 Trade Snapshot