More than half of businesses say they are likely to limit investment due to uncertainty about the impact of upcoming regulations, such as Extended Producer Responsibility (EPR) and National Insurance employer contribution increases, according to a Food and Drink Federation (FDF) Q3 report. 

Although confidence remained at roughly the same level as Q2 (-6%) among the sector, the findings reveal that a majority of businesses think the UK government needs to create “clear and stable” regulatory guidance to ensure momentum is maintained and companies feel confident enough to invest next year. 

The FDF’s State of the Industry survey, which tracks business confidence and trends in the UK’s food and drinks sector, also highlights that consulting companies on any changes or future legislation could help ensure more certainty.

Other significant barriers businesses reported include taxation and lower financial returns due to a less favorable business environment (31%). Meanwhile, there were also concerns about demand among respondents (44%).

Investment in other areas 

Despite a lack of belief from some in the industry, two-fifths of businesses plan to increase their investment in specific areas such as R&D (40%), plant and machinery (44%), and skills and training (44%) in the coming year.

Balwinder Dhoot, director of industry growth and sustainability at the FDF, says: “Investment is vital to the long-term health and resilience of our industry, as well as to countering inflation. While it’s positive to see businesses planning to boost their investment in UK production, this will have been impacted by raised costs in the [government] budget.”

“With businesses facing billions of pounds of additional tax and regulatory costs next year, we urge the government to double down on its growth mission. From removing barriers to trade to reviewing regulation and planning rules, adopting a more collaborative relationship with business, the government can do more to boost business and consumer confidence and drive investment.”

Also in the report, unfilled vacancies rose to 5.1% in Q3 2024, and a quarter (25%) of businesses highlighted labor and skills shortages as barriers to spending in the year ahead. 

Manufacturers said they will continue primarily focusing on growing UK sales (59%) and new product development (59%). The number of businesses considering digital transformation doubled last quarter.

A separate post-Budget flash survey undertaken in November by the FDF found that nearly three-quarters (71%) of companies believe the government’s latest Budget will negatively impact employee pay and business growth.