Bright future for food and drink firms despite Brexit
FOOD AND drink manufacturers expect to increase revenues in the months ahead despite a year of substantial change and uncertainty, according to a report published today by accountancy and business advisory firm BDO LLP.
BDO’s Food and Drink Report 2017 found that 73 per cent of manufacturers are positive about the future of the industry, with 81 per cent of firms expecting revenue growth of up to 20 per cent in the next year.
However, challenges still remain as operating margins are squeezed. Almost a third of firms (28 per cent) have reported a decrease in operating margins this year, with raw materials price inflation hitting the bottom line.
BDO said the volatility of raw material prices is the key challenge for food and drink manufacturers – exasperated further by Brexit. This is followed by foreign exchange rates, which was not a major concern for manufacturers questioned last year and is seen as a direct result of Brexit uncertainty.
Paul Davies, partner and head of food and drink at BDO LLP in Yorkshire, said: “The industry continues to be faced by challenges predominantly related to price and margins, and Brexit brings with it new challenges. But it is promising to see high levels of positivity in the industry, with firms pushing forward and adjusting their business plans to make the most of the opportunities available.”
Despite the challenges, firms are proving resilient in their growth ambitions. Just over half said that new product development and investment in production/capex would be a major source of growth. Some 49 per cent said access to new UK markets and 46 per cent said access to export markets will be an increasingly important part of their growth strategies.
BDO said that M&A appetite is also on the increase with 27 per cent of firms (up from 15 per cent last year) expecting growth to come from deals.
It said that the industry is becoming increasingly efficient in dealing with market pressures through product innovation and increasing investment in automation. Two thirds of food and drink firms say they are increasing investment in this area.
Attracting and retaining skilled labour was named the eighth biggest challenge. Over half (57 per cent) of those surveyed said they are experiencing difficulties in recruiting skilled people.
It is promising to see high levels of positivity in the industry. Paul Davies, partner and head of food and drink at BDO LLP.