Food & drink firms in healthy shape but costs mount up

● Major new study highlights the ups and downs of the industry in North-east

The North-east of Scotland has become a burgeoning food and drink “powerhouse”, notching up double-digit growth inside of two years, but rising costs are likely to eat into future profits, a report out today cautions.

A survey of scores of food and drink producers employing some 5,500 people in the region has found that businesses are now exporting to more than 100 countries.

Collective turnover growth between 2016 and 2018 is expected to top 15 per cent while the majority of firms anticipate increasing their workforce over the next two years.

However, a series of headwinds – including Brexit, talent attraction, rising business costs and shrinking profit margins – could impede future growth, warns the report, conducted by Aberdeen & Grampianchamberofcommercein partnership with Aberdeen26 shire Council, accountancy firm Anderson, Anderson & Brown, legal outfit Dentons, Opportunity North East and Royal Bank of Scotland.

The survey found that 64 per cent of companies have invested in equipment to improve their productivity within the last two years.

Family-run organisations continue to have a strong presence in the sector, accounting for about seven in ten businesses, while a majority of respondents – 57 per cent – anticipate an increase in their workforce over the next two years.

Recruitment continues to pose a challenge, though, with difficulty experienced in securing chefs, production staff, sales staff, engineers and butchers, the study notes.

Most businesses said they were planning an expansion into new markets. Domestic growth both in the North-east region and across the rest of the UK is seen as offering the greatest opportunity by just over half – 51 per cent – of businesses, with the EU and “beyond the EU” favoured by per cent and 32 per cent respectively. On the flip side, business costs are expected to increase, with net profits anticipated to decrease for 42 per cent of food and drink producers.

The cost of raw materials, the living wage and business rates were cited as the top factors impacting on businesses in the next two years, with the need for improved transport and infrastructure, greater availability of business support and improved regional marketing identified as target areas which would improve business conditions.

James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce, said: “The North-east food and drink sector has received increased recognition in recent years for its potential to drive economic growth and the results of this new survey show clear signs of positivity with businesses reportingconfidenceandforecasting turnover growth.

“There are some significant risks to our growth however. Companies are reporting significant increases to the cost of doing business.”