Boosting productivity

As we approach the end of the year and plan for a new one to begin, most of us enter a phase of reflection. We assess the goals we set to achieve throughout the year. We look at the highs and lows we faced. We see the things we did do, what we never had a chance to do, and the things that happened organically that we never expected.

The year 2023 was supposed to be a better one.  Yet, it has been a never-ending road of straights and hairpin bends (rising input costs and and increasing total production costs), even though the final corner is coming up. 

As we sit here now, investing in a long-term vision will make food and drink manufacturers fit for the future. 

The recently published Food and Drink Federation (FDF) Q3 State of Industry Report indicates as much and found that manufacturers are committed to growth, with over four in ten planning to increase their investment over the next year. However, the FDF asserts that the UK government must prioritise policies that support food and drink manufacturers to boost investment. 

There is a mixed picture on investment expectations with not all businesses in a position to increase their capital spending and nearly one in five (18%) report they expect their investment to fall over the next year. Some manufacturers are in a better position and are committed to growth, with over four in ten (41%) planning to increase their investment over the next year. According to ONS data, the industry’s business investment in real terms during the first half of 2023 was 36% below its level during the first half of 2019, in sharp contrast to investment in the UK overall, which has increased by 7%.

The report also reveals that confidence has increased by 18 percentage points on the last quarter creeping into positive territory for the first time since Q2 2021. This is a sign that market conditions have stabilised, however the industry still faces significant challenges with labour.

The report also found that over eight in ten (81%) manufacturers are prioritising innovation and the increase in the cost of living is changing shopping habits with nearly three quarters (73%) of businesses saying they have noticed a shift in demand towards cheaper products.

The government is aware of the situation and should take note that as, Balwinder Dhoot, director of sustainability and growth, The Food and Drink Federation highlights, with grocery volumes declining, manufacturers need to prioritise product innovation to maintain competitiveness and drive growth.

“We need the government to prioritise policies that support investment if we are to build a sustainable and resilient food supply chain which supports growth and is vital for a strong economy,” Dhoot points out. “We saw some positive signals in the Autumn Statement and welcomed the announcement on full expensing, but any benefits will be more than undone by planned regulation that will hit our sector in the coming year.”

As the year winds down, government reflections must note the need to break the doom loop of poor investment and poor growth. The case for the government to act is overwhelming. 

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