Food Manufacturers Voice Budget Concerns as Confidence Hits Record Low of -60%

Overview

Business confidence among food and drink manufacturers has plummeted to -60% in Q3 2025, a significant drop from -40% in Q2. This is the lowest confidence level recorded since the onset of the Covid pandemic in Q3 2020.

Pervasive Pessimism Among Manufacturers

• 90% of food manufacturers are feeling either pessimistic or nervous regarding the upcoming Government Budget.
• 88% are particularly worried about increased taxes and rising business costs.
• The Food and Drink Federation (FDF) urges the Government to foster business confidence by avoiding further burdens and collaborating on long-term growth strategies.

The drop in confidence marks the sixth consecutive quarter of negative outlook, exacerbated by the lingering effects of last year’s Budget and current regulatory challenges.

Industry’s Principal Concerns

Key issues contributing to declining confidence include:

• Uncertainty surrounding taxes and regulatory clarity.
• Soaring production costs, which have increased by 5% in the past year.
• 88% cite the potential for additional taxes or costs as their primary concern.
• 50% worry about more burdensome regulations, while 45% are apprehensive about new policies that might adversely affect household finances.

Ongoing Inflationary Pressures

Despite a stabilization in energy and ingredient costs, food inflation remains high, mainly driven by regulatory pressures like the new £1.1bn EPR packaging tax. Additionally, changes in National Insurance Contributions have compelled manufacturers to pass costs onto consumers. Energy bills continue to contribute to financial strain, leaving many companies facing escalating operational expenses.

In light of increased employment costs from last year’s Budget:

• 66% of businesses have already reduced or plan to reduce their workforce.
• 74% have passed on costs to consumers.
• 26% are no longer creating new roles.

Investment Challenges

Almost one-third of manufacturers (29%) have reduced or canceled investment plans in the UK due to rising costs. With regulatory pressures stifling growth and innovation, 40% of manufacturers express concern that the upcoming Budget will not sufficiently address the need for pro-growth policies.

Call to Action from Industry Leaders

Karen Betts, Chief Executive of the Food and Drink Federation, stated:

“This report captures the mood of our sector as we approach the Christmas trading period. The combination of recent tax increases, rising costs, and regulatory uncertainties creates a tough business environment. Food companies are acutely aware of the impact of continued food price inflation on shoppers, making households more cautious about spending as the holiday season approaches.”

Betts emphasized the need for a simpler and stable regulatory environment to boost investment, productivity, and sustainability in the sector, calling for a collaborative government partnership.

Untapped Opportunities for Growth

The UK food and drink manufacturing sector contributes £37bn to the economy and provides half a million jobs nationwide. With a potential £14bn growth opportunity available through technology and innovation, the FDF urges the Government to support the sector through:

• Access to funding for new technologies and innovations.
• Expanded R&D tax credits for healthier food production.
• Funding for short courses in digital skills and AI.
• A new UK trade information portal for businesses seeking international customers.

By focusing on these areas, the industry and Government can unlock significant growth potential and enhance overall food security in the UK.

Image: Unsplash