The study, produced jointly with the Food and Drink Federation (FDF), argues that while the industry is already one of the UK’s most compelling export success stories, further growth overseas is the key to overcoming challenges such as the impact of Brexit.
A snapshot of the industry
With sales of £104bn last year, the food and drink industry is the UK’s single biggest manufacturing sector, the report reveals, accounting for almost a fifth of total manufacturing output - more than automotive and aerospace combined. In aggregate, the food supply chain employs 4 million people and generates £121bn of added value for the UK each year.
Clearly, the uncertainties of Brexit and the potential for a less open trading relationship with the European Union in the future – represent a significant headwind for the sector. Food and drink businesses will also need to confront challenges such as pressure on margins, the need to embrace sustainability, regulatory compliance and the imperative to invest in innovation and technology.
Nevertheless, the untapped potential of worldwide markets is hugely exciting for an industry that enjoys a global reputation for excellence and high quality. In 2018, UK food and drinks companies made overseas sales of more than a £23bn, but the industry is ambitious. For example, the FDF hopes to grow exports of branded food and non-alcoholic drinks by a third by 2020.
There is every reason to be confident. In the first half of 2019, UK food and drink exports increased by 5.1% compared to the same period of 2018. And while sales to EU countries were up as part of that trend, sales to non-EU markets rose four times as quickly; in other words, there is huge scope for expansion in markets all around the world.
Already, the US is the UK’s third most important market for food and drink exports while China is also a top ten market. First-half sales to these countries were up by 11% and 16% respectively. The FDF thinks there is much more to come, with both countries among the five markets it has identified as top targets for growth - alongside India, the United Arab Emirates (UAE), and Japan.
UK food and drink manufacturers should not be afraid to explore the opportunities in these exciting markets. The growing middle classes of India and China offer a huge new customer base for British businesses, with premium products rising in popularity. In Japan, packaged food producers are targeting the large middle class and more elderly population. In the United Arab Emirates (UAE), the international populations of countries such as the United Arab Emirates are enthusiastic consumers of a huge variety of products made in Britain. The US, as the world’s largest economy and featuring similar consumer dynamics to the UK, is a natural fit for our food and drink manufacturers.
Nevertheless, the complexities of individual markets - and the different opportunities from one to another – mean food and drink manufacturers will need support as they expand overseas. That means strategic advice on which markets have most to offer, as well as practical help with entering new territories and trading locally.
We're here to help
Santander is fully committed to providing that support, through our dedicated sector team and specialist relationship teams. Working together, we believe the future is bright for UK food and drink manufacturing.