Business confidence among the UK’s food and drink manufacturers has remained pessimistic for a ninth consecutive quarter, according to new data from the Food and Drink Federation (FDF), with the vast majority of firms saying conditions have worsened since Labour took office.

The FDF’s latest State of Industry survey puts business confidence at -31% for Q2 2026. While that marks an improvement on the -64% recorded the previous quarter, 91% of businesses said conditions were the same or worse than in Q1 2026 — and a striking 88% reported that things had deteriorated since Labour came to power.

The findings land just ahead of Andy Burnham stepping into Number 10, giving the incoming Prime Minister an early and clear message from one of the UK’s largest manufacturing sectors: something needs to change.

Costs up, investment down

Behind the gloom is a familiar story of squeezed margins. The FDF’s data shows production costs — spanning labour, energy and ingredients — have risen by an average of 3.8% over the past 12 months. That’s left manufacturers with little room to invest in the future of their businesses: the survey found 87% have no plans to increase investment in skills over the next year, while 84% aren’t planning to boost R&D spend either.

A fresh shock from the Middle East

Just as businesses were absorbing existing pressures, a new one has emerged. Over a third of manufacturers say costs have risen by 5–10% as a direct result of the conflict in the Middle East. Nearly two-thirds (60%) have managed to absorb this extra cost so far without passing it on, but that buffer is wearing thin — 72% of manufacturers say they will now need to raise prices for consumers, meaning shoppers are likely to feel the effects well into next year.

Adding to the strain, drought conditions across Europe are now pushing up the cost of key ingredients, piling further pressure onto a sector already stretched thin.

What manufacturers want from the new PM

With its first Budget looming, the incoming administration has been handed a clear checklist by the industry. Three-quarters of businesses (75%) — rising to 91% among SMEs — want labour costs held to no higher than inflation, after a year that already saw increases to National Insurance Contributions and the National Living Wage.

Half of manufacturers (50%) are calling for a review of regulation, pointing to a pile-up of pressures including Extended Producer Responsibility fees on packaging and incoming changes to advertising restrictions, all landing at once.

Energy costs are another flashpoint, with 56% of businesses wanting government action to bring them down. Half (50%) also want to see the SPS agreement introduced to reduce friction in trade with the EU, while over a third (34%) would welcome more support with skills.

Industry reaction

Balwinder Dhoot, director of growth and sustainability at the FDF, said: “Rising costs and policy uncertainty are dampening investment, so it’s no wonder that the mood among food and drink manufacturers has been persistently low. Especially with extreme weather conditions putting increasing price pressure on businesses, Andy Burnham and his team need to set a new direction for the food system and demonstrate that they take the nation’s food security seriously.”

He added: “Food and drink businesses have spoken on the measures that would help them invest and bring opportunities to the communities where they’re based. We hope to see some of these actioned in the upcoming Budget, to help restore confidence and build a more competitive, innovative and resilient food system.”

With the Budget on the horizon and a new Prime Minister settling in, the food and drink sector has made its priorities plain. Whether the government responds could determine how quickly — or slowly — confidence in one of Britain’s most important industries begins to recover.