Food and drink manufacturers thriving

Food and drink producers recorded the strongest growth in output of any sector last month as inflationary pressures drove manufacturing price hikes, Lloyds Bank UK Sector Tracker data has revealed.

Higher demand helped the UK food and drink manufacturing industry score 59.2 in July, compared to 56.9 the previous month.

However, the research also said sustained cost pressures led to food and drink makers increasing their prices at the fastest rate of any other industry and far more than in June. All seven manufacturing sub-sectors monitored by the tracker registered cost rises in July for just the second time since 2022, while cost inflation in manufacturing hit its highest level since January 2023.

Lloyds noted many companies were experiencing elevated shipping costs, with service sector firms mentioning the issue at around 6.5 times the long-run average, as well as greater staff expenses.

Nine out of 14 sectors examined by the tracker, including healthcare, real estate and software services, reported growth in output and new orders – one more than in June.

Lloyds’ figures come a few days after a report from the Food and Drink Federation said almost 90 per cent of food and drink manufacturers expect to maintain or boost investment levels over the next year. The trade body said the figures were a sign that the industry has ‘turned the corner’ following five years of ‘policy turmoil and external shocks’ and investment levels plummeting by a third since 2019.

Balancing pricing strategy while having a competitive edge will be the aim of many businesses as they closely manage working capital to ensure that they can maintain financial resilience.”

Among the sectors which experienced lower output were tourism and recreation, with a score of 40.4, and technology equipment manufacturing and transportation, whose readings were 44.4 and 48.3, respectively.

Dave Atkinson, UK head of manufacturing at Lloyds Bank, said “The food and drink manufacturing sector has recently faced sharp and sustained cost pressures. Although the data currently indicates that many firms are able to absorb this, they may be considering how sustainable it is in the long term.”