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Job creation on the menu for food and drink firms

27 August 2015

Firms in England and Wales’ food and drink sector are readying plans to create tens of thousands of new jobs in the next five years, as they look to drive growth at home and abroad, according to a new study by Lloyds Bank Commercial Banking.

The report, Investing for Growth, found confidence strong across Britain’s biggest manufacturing sector, with firms planning to develop innovative new products and increase export activity.
 
The second annual study, which surveyed English and Welsh producers of alcohol, fresh produce and food and drink products, examines the opportunities for - and challenges faced by - the industry over the short to medium-term.
 
New jobs planned, but skills shortage a concern
The forecast for job creation in this year’s report is strong, with firms planning to create more than 73,000 new jobs over the next five years*. Against this backdrop, just over a third (34 per cent) plan to drive business growth through job creation.
 
However, with the sector facing the retirement of hundreds of thousands of workers by 2020, over a quarter of survey respondents (28 per cent) cited a lack of skilled labour as one of the biggest challenges facing the food and drink industry today.
 
Industry confidence soaring
• Optimism in the sector is universal, with 100 per cent of firms expecting to grow over the next five years, up from 98 per cent from last year
• More than four in five firms (82 per cent) forecast up to 25 per cent growth over the next five years
• Mergers and acquisitions highlighted as key growth driver by the largest operators (those above £750m annual turnover)
 
The majority of firms are focused on both entering new markets in the UK (56 per cent) and developing new products (55 per cent), as a way of achieving their growth ambitions. 
 
The cautious approach to spending and investment adopted by many companies post-recession is evident in this research. The majority of respondents (53 per cent) will fund growth using cash reserves, followed closely by cash flow finance at 45 per cent.
 
Provenance proving popular on international stage
• The majority of producers (72 per cent) plan to enter new international markets in the next five years, up from 63 per cent in 2014
• While Western Europe remains the most popular export market (60 per cent), the number of businesses targeting this territory is 16 per cent down on last year
• Second most popular target market is North America (49 per cent), followed by the Far East and Asia (43 per cent), which is also down on last year (54 per cent of businesses were planning to target this market in 2014)
• 88 per cent believe English/Welsh produce has a good reputation overseas
 
While Western Europe remains the most popular target export market amongst respondents, cited by 60 per cent of businesses, North America has overtaken the Far East and Asia since last year to become the second most attractive export destination, driven by significant demand for dairy products – in particular cheese – from the United States.
 
With 88 per cent believing English/Welsh produce has an excellent reputation internationally, the same number is activity capitalising on the heritage of their produce overseas.
 
Innovation driving growth and improved productivity
• Firms plan to invest on average a quarter (25 per cent) of current turnover into R&D over the next five years
• Half of firms (50 per cent) plan to form partnerships with other organisations in their supply chain to develop new products, streamline manufacturing processes and boost productivity  
 
Innovation is a vital spur for long term growth within the industry. Indeed, more than half of producers (55 per cent) plan to develop new products as part of their strategy for growth.
 
Andrew Connors, head of mid-sized business at Lloyds Bank Commercial Banking, said: “The contrast between the 2014 report and our latest research is really positive, with significant job creation and investment figures revealed.
 
“Productivity presents an ongoing challenge for the UK economy. Against this backdrop, the continued commitment from food and drink manufacturers to drive productivity and innovation through R&D is a clear indication of the crucial role this sector plays in the broader economy.
 
“Lloyds Bank supports producers, from start-ups to multinational brands, and will continue to help industry operators achieve their ambitions with bespoke finance and specialist knowledge. Food and drink is without doubt a sector that will help Britain prosper.”
 
More key findings
• 74 per cent view the greater emphasis on public health awareness as a positive opportunity for the industry 
• 44 per cent say a possible exit from the EU is the biggest challenge for the industry over the next five years
• A third (35 per cent) believe volatile energy prices are the most significant issue for the sector, while 30 per cent believe the same of volatile raw ingredient prices
 
Ian Wright is director general at the Food and Drink Federation, the organisation that represents and advises UK food and drink manufacturers. He said: “Britain's food and drink industry is world class.
 
“Although many of the most dynamic and best-loved food and drink brands originate here in the UK, our producers are exporting innovative techniques and ways of working worldwide. This report confirms that trading internationally is a real driver for growth, especially the opportunities offered by non-EU markets and developing economies.
 
“Our continued and growing success abroad speaks to the popularity of UK plc and our food and drink manufacturers’ track record of producing original, quality products.”


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