Food suppliers are reporting increased packaging, energy and ingredients costs amid a general fall in business confidence linked to Brexit uncertainty.
The Food and Drink Federation’s (FDF) latest business confidence survey also revealed that over a third (38%) of food and drink manufacturers surveyed are facing rising costs as a result of stockpiling ahead of a possible no-deal Brexit.
Of the companies surveyed, 71% reported an increase in packaging costs in the third quarter of 2018, while 63% and 79% said that energy and ingredients costs respectively were rising.
Many of the cost increases are linked to exchange rate volatility which is increasing the cost of importing key ingredients and other products.
There was better news on wages, however, with 60% reporting an increase in average wages versus the second quarter.
Overall, the survey showed that net business confidence has fallen by 21 percentage points between Q1 and Q3 2018, while 41% of respondents reported a deterioration in general business conditions between Q2 and Q3.
“These results tell us just how seriously the food and drink industry, the UK’s largest manufacturing sector, takes a no-deal Brexit. It is a grisly prospect to which we edge closer every passing day,” said FDF chief executive Ian Wright.
Wright did, however, add that measures in this week’s budget to support productivity, exports, enterprise and investment offered some respite for SME food and drink manufacturers.