Confidence crashes to -60% as manufacturers sound alarm ahead of UK Budget

Business confidence among UK food and drink manufacturers has plunged to -60% in the third quarter of 2025, according to the Food and Drink Federation’s (FDF) latest State of Industry report.

This marks the lowest level since the Covid pandemic and a sharp drop from -40% in Q2, as the sector braces for further disruption ahead of the Government’s Autumn Budget.

The report reveals deepening anxiety across the industry, with 90% of manufacturers feeling pessimistic or nervous about the upcoming fiscal statement.

The top concern — shared by 88% of respondents — is the potential for additional taxes or rising business costs. Half of businesses also flagged the risk of more burdensome regulation, while 45% expressed concern over policies that could further squeeze household finances, already strained by an 8.3% drop in food sales volumes compared to pre-pandemic levels.

Inflationary pressures remain a persistent challenge. Although energy and ingredient costs have stabilised, production costs have risen 5% over the past year, driven largely by regulatory burdens such as the £1.1bn Extended Producer Responsibility (EPR) packaging tax and changes to National Insurance Contributions. These pressures have forced 74% of businesses to pass costs onto consumers, while 66% have reduced or plan to reduce headcount. A quarter of firms have halted new hiring altogether.

Investment is also being hit hard. Nearly a third of manufacturers have scaled back or cancelled UK investment plans to absorb rising costs, and 40% fear the Budget will lack the pro-growth policies needed to reverse the trend. The FDF warns that without a stable, coordinated regulatory environment, the sector’s ability to drive innovation, productivity and job creation will remain constrained.

Karen Betts, chief executive of the FDF, said the report “captures the mood of our sector as we head into Christmas trading,” adding that “the combination of tax rises, escalating costs, and policy uncertainty is creating a tough business environment.”

Despite the challenges, the FDF sees a £14bn growth opportunity that could be unlocked through targeted investment in technology, innovation, and higher-skilled jobs. The organisation is calling on Government to partner with industry to deliver this potential — by expanding access to innovation funding, broadening R&D tax credits to include healthier food development, and reforming the Growth and Skills Levy to support short courses in AI, digital skills and engineering.

With the sector contributing £37bn to the UK economy and supporting 500,000 jobs nationwide, the FDF argues that now is the time for bold, collaborative action — not additional burdens.