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FDF responds to Plimsoll report on small food companies

07 June 2010

Plimsoll says 54 small food processors are in financial difficulty as the credit crunch lingers. But the Food & Drink Federation says the sector has weathered the storm better than most.

According to market analysts Plimsoll and their new report on conditions in the Food Processors industry, smaller companies have not had the same facilities to ride out the recession as well as their larger counterparts.

David Pattison, author of the Plimsoll Analysis – Food Processors explains, “While large companies have relied on their size, brands and better access to cash, smaller companies have been left high and dry”.

He continues, “We've given 54 small companies a Danger rating. While conditions have improved of late, I fear a high proportion will fail. Whereas large companies can call on banks and parent companies or cut out loss making parts of their operations, smaller companies are increasingly running out of cash”.

Pattison also points out how small companies are struggling to maintain their market share and being squeezed out of the market: “98 small companies are selling less than last year. Clearly they have seen demand for their products dip or worse still, a new competitor has emerged. With their finances already stretched, they have little left in their arsenal to fight back”.

So what next for these small companies? Pattison says, “There are clearly too many small companies chasing too little market. The inevitable consequence is another round of consolidation with large competitors buying small companies at a discount. Of the 217 companies with assets of less than £3million, we have identified 96 companies as being vulnerable to takeover”.

But the Food & Drink Federation (FDF) said the situation wasn't as dire as it could be.

“As the UK’s largest manufacturing industry, the food and drink sector can act as a valuable stabilising force at times of economic uncertainty and our members, of all sizes, have clearly weathered the storm better than most,'' the FDF told FP Express. “In fact, official Government statistics show that our sector, compared with other manufacturing industries, reduced its output the least and has already returned to pre-recession output levels(1). In addition, food and drink companies have continued to exploit the potential of export markets – with overseas sales hitting record levels last year(2).

“Like other business sectors, however, we are expecting overall UK economic growth to be sluggish over the course of 2010. Consumers and businesses will remain pretty cautious in the year ahead and we tend to agree with forecasters who fear we will have to wait until 2012 before the level of economic activity gets back to where it was before the recession started.

“Against that uncertain backdrop, we are keen to work with the new coalition to ensure that our sector can continue to compete and prosper, with a strong emphasis on the needs of smaller businesses. In particular, FDF will continue to urge Government to remove any unnecessary red tape and regulation which will limit the ability of SME companies to expand; support efforts to get banks lending again; and have backed the creation of a supermarket Ombudsman.”

*Readers of Food Processing are entitled to a £50 discount of this new special edition of the Plimsoll Industry Analysis – Food Processors. Call 01642 626400 for further details and quote reference PR/FI38.

1 Office for National Statistics: Index of Production data:
2 UK Food and Drink Export Performance 2009:

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