Manufacturer Confidence Plummets Amidst Rising Costs
Business confidence among UK food and drink manufacturers has hit its lowest point since the 2022 energy crisis, according to the Food and Drink Federation's (FDF) latest State of Industry report. In the first quarter of 2026, confidence levels dropped to minus 64%, a figure mirroring the lows seen during the early stages of the COVID-19 pandemic and following Russia's invasion of Ukraine. The outlook for the next quarter remains bleak, with confidence standing at minus 51%, indicating that manufacturers anticipate further deterioration in operating conditions. This sharp decline is attributed to a confluence of factors, including global supply chain disruptions, escalating energy prices, and increased costs for packaging and transport, all significantly impacted by the ongoing conflict in Iran. The FDF, representing 12,000 manufacturers, highlights that rising energy prices are a primary driver of this worsening sentiment.
Price Hikes and Investment Pauses Loom Large
The escalating costs are forcing a significant majority of food and drink manufacturers to plan price increases. The FDF report reveals that 82% of members intend to raise prices to offset higher expenditures. This comes as businesses grapple with a substantial increase in operational costs. For instance, the cost of plastic packaging has risen by up to 15%, and some transport costs have surged by over 20%. Furthermore, fertiliser costs remain a persistent concern, particularly given the Gulf region's significant role in global urea production. In response to these pressures, 33% of manufacturers are considering job cuts or reductions in marketing spending, while 26% plan to delay or halt investment in their businesses. This cautious approach to investment, coupled with potential job losses, signals a challenging period ahead for the UK food manufacturing sector and its workforce. The FDF has identified government support with energy costs as a key priority, with 69% of members viewing it as crucial for alleviating cost pressures.
Consumer Impact and Emerging Trends
The ripple effect of these industry challenges is expected to be felt by consumers through increased prices on supermarket shelves. The FDF had previously forecast that food and drink inflation could reach at least 9% by the end of 2026, a figure that underscores the mounting strain on both households and manufacturers. Amidst these economic pressures, consumer behaviour continues to evolve. Emerging food and drink trends for 2026, as identified by various industry analyses, include a growing interest in "flavours less travelled," with Malaysian, Korean, and South American cuisines gaining traction. There is also a noted appeal for "Topped and Loaded" dishes and a focus on "FastForward Flavours" ā ingredients poised to trend in the near future. Furthermore, the beverage sector is seeing innovation with "Tea Tonic," featuring creative tea-based drinks, and a continued desire for "Sweet Adventures" with global and novel desserts. On the menu front, heritage dishes like the Sunday roast are experiencing renewed popularity, with a 11.6% increase in diners seeking them out. Conversely, trends like craft beer, cupcakes, and espresso martinis are showing a decline. The rise of Korean barbecue and biryani signifies a shift towards South Asian and Korean cuisines becoming mainstream growth drivers in the UK foodservice sector.
The coming months will likely see a continued focus on cost management within the food manufacturing sector, with businesses closely monitoring global events and their impact on supply chains and raw material prices. Consumers can expect sustained price pressures, alongside a dynamic culinary landscape shaped by evolving global tastes and a renewed appreciation for traditional comfort foods. The industry will be looking to government support and innovative strategies to navigate these turbulent economic conditions and maintain a resilient food supply.