UK food and drink manufacturers urge government to cut costs

Food and drink manufacturers in the United Kingdom are calling on Prime Minister Andy Burnham to implement cost-cutting measures in the upcoming Budget to address declining sector confidence. According to the Food and Drink Federation’s (FDF) latest State of Industry report, business confidence stood at -31% in the second quarter of 2026. While this is an improvement from the record low of -64% in the first quarter, it marks the ninth consecutive quarter of negative sentiment.

Manufacturers report that average production costs, including labor, energy, and ingredients, have risen by 3.8% over the past 12 months. The industry is facing pressure from increased employer National Insurance contributions and the National Living Wage, as well as rising energy costs. Additionally, over a third of businesses reported cost increases of between 5% and 10% due to disruptions linked to the conflict in the Middle East.

Due to these margin pressures, investment is stalling, with 87% of respondents reporting no plans to increase spending on skills and 84% reporting no plans to boost R&D investment in the coming year. The FDF warned that while 60% of businesses have absorbed these costs thus far, the situation is becoming untenable, with 72% of manufacturers stating they will eventually need to raise consumer prices.