Untapped overseas export markets remain a “golden opportunity” for recovery and growth for companies across the food and drink sector as business confidence falls to record lows, a new report reveals.
The report from Santander UK and the Food and Drink Federation (FDF) delves into the impacts COVID-19 has had on food and drink manufacturers and overall business confidence.
The industry has faced a variety of challenges from the closure of the hospitality and out-of-home sectors, to rising costs and a fall in exports. The sector has also seen a reduction in domestic turnover by 8.6% in Q1 compared with Q4 2019, and a further 4.0% decline in Q2.
FDF’s latest data shows that net business confidence among food and drink manufacturers reached a record low of -65.2% in Q2 due to COVID-19, uncertainty over Brexit and closure of food service.
Separately, Santander has carried out research into the impact of COVID-19 on SMEs. The results found that 24% of food and drink businesses expect to return to normal operating levels by the end of 2020.
Despite the challenging environment, food and drink businesses highlighted increased export growth and access to new UK preferential trade agreements as a key opportunity for the rest of the year.
The report highlights export opportunities in three key market regions; the UAE and the wider Gulf region, China, and the USA and Canada with insights from Santander’s experienced sector and international specialists who support businesses looking to explore overseas opportunities.
“As the dust begins to settle, we can now see how the pandemic has had a seriously damaging impact on 2020 ‘s overseas sales of UK food and drink,” said FDF Chief Executive Ian Wright.
“These were worth over £23 billion in 2019. While that figure is certain to fall for this year, there are still plenty of opportunities in foreign markets for UK food and drink manufacturers to seize in what remains of this year and as we look to 2021.
“As businesses turn toward economic recovery, ensuring a quick return to growth will be essential to support resilience in our industry.
“We will continue to work closely with Government and industry partners, like Santander, to safeguard a sector recovery that will deliver a return to sustainable export growth right across the UK.”
Andrew Williams, Head of Food & Drink Sector, Santander Corporate & Commercial Banking, added: “The impacts of COVID-19 swiftly reverberated across the food and drink manufacturing industry.
“We quickly saw that over-reliance on any single market, sales channel, or customer leaves businesses vulnerable to increased risk. Understandably, confidence was knocked – but the resilience of our industry is evident in these findings.
“As the short-term impacts begin to settle, UK food and drink businesses have already recognised that increasing export sales is a potential route to recovery and offers growth and diversification benefits too.
“There is much to be optimistic about and a real sense that as a sector we are striving towards a positive future.”