Food and drink businesses find cause for optimism amid overseas opportunities

Adam Hardie

Adam Hardie

Business Development Partner and Head of Food & Drink

27 February 2024

Almost seven in 10 (68%) of UK food and drink businesses are optimistic about future growth despite costs continuing to be a significant challenge, according to a new survey of the sector.

The research was carried out by leading UK independent accountancy and business advisory firm Johnston Carmichael, as part of an annual temperature check of the sector.

Almost all those who took part experienced a rise in costs over the last 12 months. Respondents said the top source of increased costs was energy bills (30%), followed by labour costs (25%) and raw materials (23%). 

To mitigate against their increased cost base, respondents said they were seeking operational efficiencies including supply chain review, but the vast majority said they have had to increase the price to consumers. Of those who increased their prices, more than half (52%) sought increases of 5-10%. While 16% increased prices by more than 10% this was a reduction compared with 2022, when 27% increased their prices by more than 10%.

Despite the pressures, and a continuing global backdrop of uncertainty, 70% of respondents said they were optimistic, or very optimistic, about future growth of their business – up from 60% a year ago.

Adam Hardie, Partner and Head of Food & Drink, Johnston Carmichael, said:

“In the last 12 months, businesses have struggled with unprecedented cost increases. Raw material costs, availability and increasing costs of labour, as well as global instability as the war in Europe continues to cast its shadow on trade. The sector has been disproportionately hit by energy costs, and although reduced, are still significantly higher than the recent past. The new living wage will also affect all employers.

“That said, the industry continues to be innovative, remain in robust health and we all need to eat. 

“The good news is that seven in 10 food and drink businesses are optimistic about future growth, and there is a great opportunity around export. We would welcome greater public sector investment to help support the sector’s growth ambitions, while measures to simplify international trade post-Brexit could help to boost export.”

Many of the businesses surveyed have strong intentions to export. While the majority of respondents cited the UK as their main market, 56% of businesses identified Europe as a key region, 46% said they are targeting Asia Pacific and 40% are targeting North America.

When expanding internationally, most businesses preferred doing so via a local distributor (39%). However, 35% of businesses said that they were not operating globally, suggesting a substantial growth opportunity for the UK’s food and drink sector.

With Brexit, half of businesses felt the same as they did 12 months ago, but a quarter of respondents are feeling less positive than they did last year and some commented that they have given up entirely on trying to export into the EU due to the costs and challenges of complying with regulations.

Nicola Thomas, Director, Food and Drink Exporters Association (FDEA), said: “We welcome Johnston Carmichael’s insightful research.

“Despite a challenging backdrop, it is encouraging to see that finding new customers in export markets is the second most important primary growth driver for survey respondents. 

“There is good reason for optimism amid the global uncertainty as Europe is very much open for business, consumers in emerging markets have an appetite for – and money to spend on - imported foods, and Made in Britain is a very powerful, internationally recognised hallmark of quality, innovation, food safety and security.

“One key to success is for UK food and drink businesses to focus on what they do best and outsource the rest to specialists who are invaluable in helping to mitigate some of risks around export including logistics and labelling, customs and compliance.”

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