Exports to fuel UK food & drink sector growth

Posted on 11 Jul 2017 by Jonny Williamson

The UK’s booming food and drink industry is set for strong future growth off the back of global demand for UK manufactured produce, despite concerns over the impact that Brexit might have on staffing levels in the sector.

UK Manufacturing - Food Hams Bottle Glass Wine Beer - image courtesy of Pixabay.
UK products were exported to a record 217 international markets, five more than in 2015 – image courtesy of Pixabay.

Food and drink exports have gone from strength to strength in recent years with 2016 marking the first year that the value of exports of the food and drink sector exceeded £20bn.

In addition, a focus on healthier foods and the use of new technologies such as automation to improve manufacturing processes will also drive future opportunities, according to a new sector report from Santander and EEF.

UK products were exported to a record 217 international markets, five more than in 2015. Despite this, only one in five UK food and drink manufacturers currently export, and there’s a clear opportunity for businesses to “grow through exports”.

Europe is the biggest destination for UK food and drink exports, with 60% of all exports travelling either across the Channel or Irish border; and the majority of export opportunities for UK businesses remain close to home.

Exports to Europe expanded by 85% over the past 20 years. However, exports to Asia & Oceania and the Americas have seen the fastest growth since 1996, at 155% and 154% respectively.

The Middle East and Africa is also a rapidly expanding market, with exports there growing by 109%, although the region remains at only 8% of total UK food and drink exports.

In terms of products, the UK is the second-largest exporter of beverages in the world, and the only food and drink category where the UK is running a trade surplus with the rest of the world.

This is mainly down to its specialisation in alcoholic beverages and particularly exports of whisky, where the UK is the leading exporter globally, generating over £4bn in overseas sales and a surplus of £3.9bn in 2016.

Along with exporting, the report from Santander and the EEF identified four other key drivers of future growth:

Healthier food options – The rise of the healthy eating and “natural foods” agenda shows no signs of abating. The growing popularity and the consumer desire to lead healthier and cleaner lives has resulted in manufacturers looking to reduce sugar, salt and artificial trans fats content in their products, as well as launching designated healthy food lines.

Increase in R&D and innovation – The UK food and drink sector, given its size, invests a low amount in research and development (R&D) compared to other sectors – making up 2.9% of total manufacturing R&D in 2015. An increase in R&D should lead to additional growth.

Smart packaging and sustainability – Smarter packaging has the potential to revolutionise the food and drink sector in areas of food quality and safety, waste minimisation and consumer convenience. This is of growing importance given that the UK threw away 4.4 million tonnes of avoidable waste in 2015 and is currently not self-sufficient in fulfilling its demand for food.

Growth of online shopping – Online grocery shopping is becoming increasingly common in the UK, as consumers take advantage of the greater convenience supermarket deliveries offer them. Currently only 1 in 10 consumers do all their shopping online, but the Institution of Grocery Distribution forecasts online shopping growth of 68% between 2016 and 2021.

One of the key challenges identified in the report concerns the fact that the food and drink sector is more reliant on EU workers than any other sector of the UK economy: a third of the sector workforce are non-UK EU nationals, representing almost 120,000 workers.

These workers range from seasonal labourers in processing facilities to highly skilled researchers and food scientists. Retaining access to this pool of workers is a key priority, states the report, especially given the demographic and skills gap the industry is facing.