UK manufacturers optimistic about sector’s future
UK food and drink manufacturers are setting their sights on growth and investment, according to a new report published by accountancy and business advisory firm BDO LLP.
The sector is flourishing thanks to rising business confidence, product innovation and investment in automation, the report finds.
BDO’s Food & Drink Report 2016, in association with the Institution of Mechanical Engineers, found that 79% of those surveyed are positive about the future of the industry, with 86% of firms expecting revenue growth of up to 20% in the next year.
Pricing pressures, the volatility of raw materials costs and skills shortages are major challenges for manufacturers. However, through product innovation and investment, and with 70% of surveyed firms having arranged fixed price agreements with energy suppliers, the sector has become increasingly efficient and smart in dealing with market pressures.
Nearly two thirds of firms surveyed said that new product development would be a major source of growth, with 60% and 43% saying access to new UK markets and export markets respectively will be increasingly important parts of their growth strategies.
Organic growth is the priority as, for a sector that is usually a vibrant source of mergers and acquisitions, only 15% expect growth to come from transactional activity.
Automation has become an important issue on the boardroom agenda, with more than half of the food and drink firms questioned saying they are increasing investment in this area.
Operating margins continue to be squeezed, according to 82% of companies, and pricing pressures remain the top challenge for food manufacturers and processers.
Attracting and retaining skilled labour was named the second biggest challenge, on a par with the volatility of raw materials. Nearly three quarters (70%) of those surveyed said they were experiencing difficulties in recruiting the skilled people they require.
Paul Davies, head of food and drink manufacturing at BDO LLP, comments, “Pressures on pricing and margins remain hugely challenging, but the overall sentiment of the sector is a positive one.
“We all know that the manufacturing sector plays a critical role in rebalancing our economy and driving long-term sustainable growth for the UK, yet little action is being taken to support the food and drink industry, the single largest manufacturing sector in the UK.
“We would urge the chancellor support the sector in his Budget next month. Increasing the annual investment allowance to £5 million for five years in support of automation investment and introducing a temporary reduction in Employers’ National insurance for manufacturers to recruit the talent they need would be a great step in the right direction.”
Dr Tim Fox, chair of the Institution of Mechanical Engineers’ food and drink engineering committee, adds, “This report highlights the critical skills shortage the UK is facing.
“We need to encourage more people to pursue engineering careers and to champion the diverse and exciting career prospects for engineers and technicians working in food and drink manufacturing.”
