The Food and Drink Federation (FDF) has issued an urgent call to the UK government to prioritise a competitive business environment after newly released trade data revealed that British food and drink manufacturers are losing critical ground to international competitors.

According to the FDF’s Q1 2026 Trade Snapshot, UK export volumes have plunged to their lowest level in a decade outside the height of the pandemic, while food imports from abroad continue to climb.  

The sharp imbalance highlights a widening trade gap, triggering warnings from industry leaders that high domestic production costs and unfavourable trade conditions are severely squeezing British brands both at home and abroad.  

The Q1 2026 trade gap at a glance

The first quarter of 2026 exposed a stark divergence between outbound shipments and inbound foreign products:

Non-EU markets slump as tariff pressures intensify

The decline was most pronounced outside the European Union, where non-EU exports plummeted by 11.5% compared to Q1 2025. A primary driver of this slump was trade friction with the United States, following additional tariffs imposed by the US in April 2025.  

• US export collapse: UK food and drink exports to the US fell by over a quarter (27.9%) in value terms. 
• US import surge: in reverse, US manufacturers grew their presence in the UK market, with imports rising 11.5% to £419.5m. 
• Shrinking surplus: consequently, the UK’s trade surplus with the US shriveled by 69.3% to just £110m — marking its lowest level since Brexit.  

The downturn also affected markets tied to newer trade agreements. Export volumes to member nations of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) fell by 11.3%, while volumes to India dropped 16.6%. The FDF pointed to these figures as clear evidence that UK companies require active government support to fully navigate and reap the benefits of global trade agreements.  

Meanwhile, long-standing friction with the EU continues to erode trading volumes, with EU exports down 6.9% in volume terms for the quarter. This ongoing contraction directly hit the UK’s largest trading partners, with export values to Ireland dropping 6.3% and France falling 5.8%.

Rising input costs stifling production

Compounding the export slowdown is a domestic “squeezing” effect driven by escalating input costs.

The report reveals that the financial burden of importing necessary raw materials and ingredients — including packaging items like plastic — is now 38.6% higher than it was in January 2020.  

Coupled with expensive domestic energy bills, rising employment costs, and a constantly changing regulatory landscape, UK food and drink manufacturers find themselves operating from a vastly higher-cost base than their global counterparts.

The FDF notes that a sector being squeezed at home has far less capacity to absorb risks overseas or build global export volume.

Industry warnings: “a storm is brewing”

The federation has cautioned that current government policy considerations regarding tariff removals could aggravate an already fragile sector.

FDF chief executive Karen Betts warned that a failure to protect the home market could permanently damage long-term national resilience and food security: “Food and drink businesses are part of the fabric of every community in the UK, and it’s concerning to see them struggling to compete overseas. The costs of producing food and drink in the UK are higher than in many competitor economies, from energy to employment, and constantly changing regulation only adds to these.”

Betts further criticised proposed UK tariff suspensions on finished manufactured goods like chocolate, biscuits, jams, and spreads — which would make it cheaper for global competitors to export into the UK while British firms continue to receive no reciprocal relief: “There is plenty government can do to improve the competitiveness of our food and drink exporters, many of which are SMEs, from helping companies to access the benefits of trade deals to lowering the cost of doing business in the UK.

“The government’s current proposals to remove tariffs on imported food risk making a bad situation worse. It is very undermining of UK businesses and of the people they employ, and it undermines the UK’s food security in the longer term. Government should suspend tariffs on ingredients rather than manufactured products, to lower the cost of producing food here in the UK and to help businesses keep prices down for consumers.”