Manufacturing: Food & Drink Report 2021

21 June 2021

Food and drink manufacturers battle Covid-Brexit double whammy but look ahead to growth

-    Three quarters feeling upbeat about future growth
-    85% have reassessed their business strategies as a result of COVID-19
-    Sector generates £105bn for the economy & employs nearly half a million people

Food and drink manufacturers have endured the twin challenges of COVID-19 and Brexit with resilience and strength, and are ploughing ahead with growth, according to new research published today by accountancy and business advisory firm BDO. 

Despite a year of substantial change and uncertainty, BDO’s Food & Drink Report 2021 shows that more than three quarters (78%) of businesses are feeling positive about their future prospects, with 68% expecting profitability to increase in the next 12 months. 

Looking ahead, new product development, expansion into new UK markets and investment in production are the top three areas of growth identified. Business leaders also see sustainability as a key focus, particularly in reducing waste, plastics and emissions.

However, challenges remain for the sector which employs 430,000 people and contributes £104.4bn to the economy. Almost a third (31%) of the businesses questioned experienced a decrease in margins last year and, with rising inflation on the horizon, increased pricing pressures are expected.

Paul Davies, head of food and drink at BDO, comments: “Sectors from aerospace to the arts have taken body blows from COVID-19 that will require a long period of recovery. Fortunately, food and drink has proved more resilient to the impact of the pandemic. 

“While there are clearly still many challenges ahead, food and drink manufacturing has held up remarkably well with business leaders proving quick to react to the challenging and ever-changing trading environment.”

COVID-19 impacts

The ongoing impact of COVID-19 is the largest challenge by some margin, cited by 67% as the biggest threat to their business. 

An overwhelming majority (85%) said they had been forced to reassess their business strategies as a result of COVID-19.

In a show of the sector’s resilience, less than half (42%) had utilised the Government’s job retention scheme. Supply chains were also able to hold up well in the face of COVID-19-related lockdowns and other restrictions; while three quarters of businesses experienced delays, they did not stop production.

New UK markets open up

One of the biggest shifts in focus for food and drink manufacturers over the last few years – albeit not surprising given the twin challenges of Brexit and COVID-19 - is an increased emphasis on new UK markets for business growth. 

According to the BDO report, expansion into new UK markets (56%) is now in joint first place with new product development as a business growth priority – a huge jump from 34% three years ago.

Almost two thirds of respondents cite customs procedures as the biggest Brexit challenge they have experienced to date. 

A call to government 

The BDO report states that food and drink manufacturers are calling for improved support for exporting and clear, relevant tax incentives to encourage investment. 

Paul Davies adds: “The industry is a huge employer and accounts for 20% of total UK manufacturing. It is an industry with ambitious – yet sensible – growth targets. 

“With the right support in place, not only could these businesses thrive post-pandemic, but they could also play an important role in creating a green economy, driving digital innovation and productivity, and levelling up the north-south economic divide.”

ENDS

BDO’s Food and Drink Report 2021 is available to download here.

Note to editors

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world. 

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high-growth businesses that fuel the economy.  

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed.  

BDO LLP
BDO LLP operates in 18 offices across the UK, employing 6,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.

BDO’s global network
The BDO global network provides business advisory services in 167 countries, with 91,000 people working out of 1,658 offices worldwide. It has revenues of $10.3bn.  

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