Business optimism has waned in the fourth quarter, with the key indicator of business confidence turning negative for the first time since the first quarter of this year. The result contrasts with positive indicators in the previous two quarters, with a particularly strong performance in the third quarter.
Food and drink manufacturers attributed their lower optimism to rising costs and uncertainty about the economic outlook.
Busiest production period
“Christmas is traditionally our busiest production period and when we would expect to see higher levels of demand in both our domestic and overseas markets,” said Barnes.
“However, continued rises in ingredient prices and an uncertain economic outlook are impacting confidence and this volatility is making it harder for businesses to plan ahead.”
But the food and drink manufacturing sector had always proved resilient, he added. “We are confident that it will continue to be so and make a significant contribution to the UK’s economic recovery.”
In the third quarter survey more than half of the survey’s respondents reported that domestic sales had grown. The growth was attributed to the good weather in August and the Olympic and Paralympic Games.
More than half (53%) of survey respondents reported growth compared with the previous quarter.
Despite the fall in optimism in the latest survey, respondents reported continued investment in new products, upskilling staff and research and development.
A third of respondents expected to increase their spending on training in the fourth quarter.
But capital expenditure dropped to a negative balance of 7%, reflecting lenders' decision to tighten lending coupled with the economic uncertainty.
Also, while exports were strong in the first half of the year, there were signs of a slowdown in July and August, reflecting lower demand from Eurozone markets.
Food and drink exports
Food and drink exports are expected to remain at current levels during the fourth quarter.
Meanwhile, the Confederation of British Industry (CBI) has listed food manufacturing and agriculture as one of seven key “champion sectors” for growth, urging the government to develop a “coherent industrial strategy to boost exports”.
Business leaders are invited to attend the annual Business Leaders’ Forum – organised by our sister title Food Manufacture − on the morning of Tuesday January 15 2013 at the offices of our host sponsor Stephenson Harwood in the City of London.
One of the subjects under discussion will be the business climate and strategies to mitigate the impact of rising ingredients and energy costs.
This event is now in its seventh year and is targeted at senior executives working within the UK’s food and drink manufacturing sector. It will be chaired by Paul Wilkinson, who has a distinguished record over many years on the Boards of various well-known UK food companies. Wilkinson is also the Chairman of the National Skills Academy for Food and Drink.
