Food manufacturers upbeat on prospects - BDO

More than three-quarters, 78 per cent, of Midlands food and drink manufacturers are positive about their future prospects, according to new research published by accountancy and business advisory firm BDO.

Despite a year of substantial change and uncertainty, BDO 's Food & Drink Report 2021 shows that 68 per cent 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 by manufacturers in the survey. Business leaders also see sustainability as a key focus, particularly in reducing waste, plastics and emissions.

However, challenges remain for the sector which employs 93,000 people across the Midlands and contributes £5.57bn to the regional economy.

Almost a third (31 per cent) of the businesses questioned experienced a decrease in margins last year and, with rising inflation on the horizon, increased pricing pressures are expected.

Cindy Hrkalovic (pictured), audit director at BDO in the Midlands, said: “Across the region, 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, which has been positive for the region as a whole.

“The East Midlands employs the highest number of people in the industry (61,000) in the UK and another 32,000 people work in food and drink manufacturing in the West Midlands. While there are clearly still many challenges ahead, food and drink manufacturing has held up remarkably well. Business leaders have been quick to react to the challenging and ever-changing trading environment."

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

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

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

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

Cindy added: “The industry is a huge employer and accounts for 20 per cent 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 regional economic divide. ”