In the UK, food and drink manufacturing is the largest industry, it’s even bigger than the aerospace and automotive manufacturing industries combined. For example, according to the Food and Drink Federation (FDF), food and drink manufacturing has a turnover more than £100bn and makes up nearly 20% of all manufacturing. It provides over 400,000 jobs and supports other industries including agriculture, packaging and logistics.
Why is the industry so important in the UK?
Asides from the jobs it creates and the other industries it supports, food brings communities of people together and the production of food requires skill and strong business relationships.
In regard to Brexit, food security has become an increasing public concern. The FDF which represents over 300 companies, believes that an uncoordinated exit from the EU would be disastrous for the UK food and drink industry. Product availability is likely to be an issue as the UK imports around £46bn worth of food each year. Likewise, from an export point of view, there would be a massive disruption, with some UK manufacturers not able to export their products across Europe until the EU grants approval.
Despite the concerns around Brexit, the FDF chief executive states that “the food and drink industry is absolutely committed to working with the government and the devolved administrations on the development of more detailed plans and practical solutions for our vital industry as we leave the EU.”
“No industry is more uniquely placed to deliver the benefits of trade to every UK community. Together, our supply chain produces, packages, distributes and sells a wide range of food and drink at every price point, more than ever before, in every corner of the UK.”
Does the uncertainty of Brexit and the current ‘transition period’ cause concern?
In spite of this uncertainty, food exports overseas have gone up by just under a quarter in the last two years. Equally, although UK consumer confidence has fallen, food spending has still broadly remained consistent.
PWC highlights that “companies that demonstrate value to consumers and work closely with grocers, for example by launching innovative products and supporting category management, may be able to turn Brexit into an opportunity and win market share.” The last recession illustrated that difficult times provide opportunities for manufacturers to differentiate themselves.
PWC believe that the substitution of suppliers may be required as switching to a local supply may not mitigate the impact of high raw material costs as the increase in demand for local materials would instead lead to higher prices. Instead, they advise manufacturers to source wheat from other countries such as Canada as the variation in protein content from UK wheat will be a differentiating factor.