Food And Drink Industry Report 2020

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FOOD AND DRINKINDUSTRY REPORT2020In partnership with:

ForewordThese are testing times for food and drink manufacturing businesses.A heightened focus on the role of plastics in food packaging is likely tomean tougher regulation. Similarly, concerns about health and obesity ratesalready mean that UK manufacturers face significant challenges from government(and there is much more to come). Finally, I fear our future trading relationship withthe EU will continue to be overshadowed by uncertainty for a long time to come.When the going gets tough, it’s important aboveall to have good friends you can count on. FDF’spurpose - our mission - is to be that good friend tofood and drink businesses.Ian Wright, CBEChief Executive, FDFSantander is certainly a very good friend to FDF.Our partnership enables us to extend the reachand quality of our services to FDF members andSantander customers alike. Santander expertsoffer us wise counsel and access to their extensivenetwork of contacts. We have learned a great dealfrom them and, I hope, the obverse is true too.Encouraging more businesses to overcome theirconcerns about exporting is a high priority for FDFand for Santander. We are seeking to persuadethe Government to invest (alongside us) in morespecialist support to help companies take advantageof more export opportunities. We know that theworld loves the provenance, impeccable quality andfabulous taste of UK food and drink, so now is thetime to seize that opportunity.It is a great pleasure to work with Santander and Icommend this paper to you.Though their expertise is wide-ranging, Santanderoffers a particular capability around exports. As youwill see in this report, UK food and drink exportshave been a singular success in recent years,achieving strong (in some cases double-digit)year-on-year growth. But we start from a relativelylow base, in that only around one-in-five of ourfood and drink businesses are exporters. In somecompetitor markets, that proportion is much higher.Food and Drink Industry Report 2020Page 2

ForewordSantander is delighted to be associated with the FDF and its IndustryReview paper. The report provides a crucial insight into the currentsentiment felt by those operating in the sector.We’re at a delicate moment in the UK’s economiccycle. With Brexit on the near horizon, the UK’sfood and drink industry will be a vital element ofbusiness and output in the UK, both domesticallyand internationally.The food and drink industry is the UK’s largestmanufacturing sector, contributing 31.1bn tothe economy annually and employing 450,000people. It is a key part of the nation’s 121billion ‘farm to fork’ food chain.Andrew WilliamsHead of Food & Drink SectorSantanderOur industry is critical to national security and theprosperity of our wider economy and a well-earnedglobal reputation for provenance, quality and innovation.This report focuses on five core areas – Internationaltrade, innovation, skills, packaging and regulatorychanges – all which provide both challenges andopportunities.Santander is fully committed to supporting food anddrink manufacturers and has a dedicated sectorteam and specialist relationship teams workingclosely with professional organisations such asthe FDF and DIT. We want to assist the industry toseize opportunities, maximise growth and boostproductivity. We believe the food and drink industrycan be an engine for economic growth in the UK,while continuing to provide safe, innovative andnutritious food and drink to the nation.The challenges we face in the next few yearsare unparalleled and the market environmentin which we operate remains uncertain. We’reaware that the challenges include a changingconsumer landscape, pressures on margins, Brexit,sustainability, nutrition and the continual need toinvest in technology and innovation.However, this is a resilient and adaptable industry withhuge opportunities available to our sector, so that wecan sell more great British food and drink. Therefore,it is key that we identify how best to harness our owngrowth potential and improve productivity.Food and Drink Industry Report 2020Page 3

Our Industry at a Glance2.1.The UK food & drinkmanufacturing sectoremploys more thanThe food & drinkindustry is the biggestmanufacturing sectorin the country.In 2018, totalfood & drinkexport figureswere worthmore than6.11.IrelandUSAFrance,theGrowexports ofbrandedfood andnonalcoholicdrink by athird.FDFexportambition&13.rof ou450,000s907,2seesdrink businWe will need140,000new recruits by 2024peopleto feed an expectedpopulation ofpeople& meet market demands70m57.3 million35.5 millionfewer kilogramsof sugars1trillionless kilogramsof total fatfewer caloriesthan they were in 201510.to reach 6bnby 2020Our industry employs overareSM Es9.Our top threeexport markets are 23bn4.4 millionless kilogramsof saltsugars than they werein 2015to the economy8.12.d&14.3billionfewer teaspoons of 31.1bn7.larger thanautomotive& aerospacecombinedfooFood & drinkcontributesof its food & drinkexports go tothe UK ( 4.6bn)EU workers.overof our workforceFDF members are selling:5.FDF membersare selling3.37%106,0001/497%4.The UK is Ireland’slargest tradingpartner forfood & drink.The food supply chainemploys4 million 121 billionpeople& generates overof added value for theeconomy each year14.Our industry hasa turnover of 104bn,accounting forof total UKmanufacturing19%3rd15.1st2ndThe top 3 opportunitiesidentified for food and drinkmanufacturers in 2019 aredomestic demand,healthy food products& investmentSources: 1, 3, 6, 11, 12, 14: The Office for National Statistics. 2: Eurostat. 4: The British Soft Drinks Association. 5, 9: FDF Ambitions. 7, 8: Her Majesty’s Revenue & Customs. 10: The Department for Environment, Food & Rural Affairs.13: UK Commission for Employment and Skills. 15: FDF Business Confidence Survey.Food and Drink Industry Report 2020Page 4

TOP 20 MARKETSKEY INDICATORSExports SnapshotH1 2019H1 2018H1 2019ChangeIreland 2.0bn-1.9%All food & drink 10.7bn 11.3bn5.1%France 1.1bn6.5%EU 6.8bn 6.9bn2.3%United States 1.1bn11.0%Non-EU 4.0bn 4.4bn9.8%Netherlands 851.6m6.2%EU share63.0%61.4%-1.6pp 730.4m2.5%36.9%38.6%1.6ppGermanyNon-EU shareTrade balance- 12.2bn- 12.3bn-0.8%Spain 444.3m-4.2%Belgium 379.5m9.2%China 344.4m16.2%Italy 290.3m2.1%Australia 203.3m-0.3%Poland 202.9m8.4%Hong Kong 193.7m-10.6%Singapore 192.5m3.1%Denmark 170.9m1.5%Sweden 161.3m11.8%Canada 154.7m9.2%United Arab Emirates 151.8m-11.1%Executive SummaryTOP 10 PRODUCTS 1 2019 exports of food and drink increased by 5.1% (y-o-y)Hto 11.3bn. This has largely been driven by growth in the valueof exports to non-EU countries ( 9.8%), with growth over fourtimes that of exports to the EU. he UK’s food and drink trade balance has declined, indicatingTthat relative dependence on imports has increased by 0.8%since H1 2018.ChangeH1 2019ValueValue (%)Volume (%)Whisky 2.2bn 220.5m10.9%9.2%Salmon 400.1m 87.8m28.1%24.7%Chocolate 357.2m 15.9m4.7%3.7% hile year-on-year growth in the value of food and drink exportsWexceeded 11% in Q1, the second quarter of the year saw adecline on the same period in 2018 (-0.6%). Evidence frommembers suggests that the figures we reported in Q1 weresignificantly inflated by the impacts of stockpiling.Wine 349.3m 46.3m15.3%-11.4%Cheese 348.3m 19.5m5.9%5.8%Gin 333.5m 49.2m17.3%16.1%I n line with this, a large proportion of members have reportedthat they predict exports in the wider UK economy to declineover the remainder of 2019.Beef 276.4m 7.8m2.9%13.5%Pork 256.3m 35.8m16.2%9.6%Japan 150.8m23.6%Breakfast cereals 242.1m 0.5m0.2%3.9%Taiwan 128.0m24.4%Beer 239.1m 2.8m1.2%3.9%South Korea 106.3m14.9% 4.4bn 6.9bn 4.0bn 6.8bn 3.9bn 6.3bn 3.7bn 5.7bn 3.4bn 5.3bn 0bn 5.7bn 2bn 5.6bn 4bn 5.4bn 6bn 3.4bn 2.4bn 3.5bn 2.0bn 3.1bn 8bn 3.0bn 10bn 5.5bn ll of the UK’s highest value exported products have grown inAH1 2019, with whisky, salmon, wine, gin, and pork increasing byover 10% on the same period last year. Salmon, beef and ginhave also all seen volume growth above 10%. 12bn 4.9bn ther key markets that have seen negative growth includeOSpain, Hong Kong and the UAE, where the value of a varietyof exported products has fallen, including: sauces, ice-cream,meat products, and confectionary.H1 UK FOOD AND DRINK EXPORTS OVER 10 YEARS 4.6bn xports to the UK’s top trading partner, Ireland, have fallen inEvalue on H1 2018, for the first time since H1 2015. The two keydrivers of this decline were weaker exports of cereals & floursand meat-based products. On the other hand, growth to theUK’s remaining top five markets (France, USA, Netherlands, andGermany) has been positive.H1 2009H1 2010H1 2011H1 2012H1 2013H1 2014H1 2015H1 2016H1 2017H1 2018H1 2019Non-EUEU27FDF analysis of Her Majesty’s Revenue & Customs dataFood and Drink Industry Report 2020Page 5

Developing MarketsUK food and drink exportshit 22.6bn1 in 2018, playing acritical role in the success andeconomic contribution of thesector. Santander and FDF workin close partnership to help UKbusinesses seeking to exportquality UK food and drink.Export Target MarketsFor over two years, the FDF has been workingwith its members, UK Government and partnersacross the food and drink supply chain todevelop a Food and Drink ManufacturingSector Deal. Producers identified five keygrowth markets as top targets for UK industrybased on analysis produced by Grant Thornton– China, India, the Gulf (with a focus on theUnited Arab Emirates), USA and Japan2. Theyhave been highlighted as markets that offersignificant opportunities for export growth butthat businesses typically struggle to enter due tomarket complexity, cost and unfamiliarity.JapanWith a large middle class and one of the oldest populations inthe world, packaged foods have been identified as a key growthopportunity for businesses exporting to Japan3. UK food and drinkexports have grown by 85%4 over the last decade to Japan,with a wide range of products being sold. In 2018, whisky ( 128m, 30%), coffee ( 17m, -2%) and wine ( 9m, -3%) were the UK’s topthree exported products5 to Japan. From the UK’s top 20 exportedproducts, cheese ( 302%) and animal fats ( 145%) recorded thefastest growth6.An EU-Japan preferential trade deal has applied since Feb 2019,reducing Japanese tariffs and expanding opportunities to trade.However, if the UK leaves the EU with no deal, UK food anddrink manufacturers will lose this access, until UK Government isable to secure a new agreement. As part of the Food and DrinkManufacturing Sector Deal, FDF is working with Government toput in place additional food and drink specialists in Japan tosupport companies and drive increased export growth.Top 5 UK food and drink exports to Japan 2018Fish & seafoodAnimal feedCoffee, tea & spicesMalt, starches & wheat ood and Drink Federation, Exports Snapshot 2018, March 2019F Grant Thornton, FDF Economic contribution and growth opportunities, June 20173 Government of Canada, Market Overview – Japan, Global Analysis Report4,5,6Her Majesty’s Revenue & CustomsSantander Data sources: All from public domain including, Food & Drink Federation(FDF), Food & Drink Exporters Association (FDEA) and Her Majesty’s Revenue &Customs (HMRC).1 9.5m 20.7m 34.0mSpiritsFood and Drink Industry Report 2020 142.7mExport value ( )Source: Her Majesty’s Revenue and CustomsWe believe that Japan presents an excitingopportunity for businesses in this industry.Exports in 2018 totalled 275m whichrepresented an increase of 15%. During the firstsix months of 2019, export trade was 151m witha significant 23.6% increase year on year (YOY).Japan is the world’s third largest economy, meaningthis market demands high quality and differentiatingproducts, which the UK is well positioned to satisfy.We have strong partnerships within a network inJapan, which we’re able to leverage to assist UKbusinesses with their international trade ambitions.As part of this, we’re proud to have a bankingpartnership with Mitsubishi UFJ Financial Group,Inc. (MUFG).Thanks to our strong relationship with MitsubishiShokuhin – one of Japan’s largest food and drinkdistributors – we were recently able to introducetwelve UK companies to this market. They wereable to showcase a range of superb qualityproducts, including those of Royal Warrant Holdingbusinesses and a variety of whisky and gin brands.We’ll continue to work and deepen relationships withthis high-profile distributor and match its categorydemands to UK manufacturers, thus creating uniqueand bespoke opportunities for UK companies. 17.5m2Santander’s insightsLooking forward, we’re exploring opportunitiesthat will be created with the 2020 Olympics inTokyo along with UK Regional Food initiatives.Page 6

Developing MarketsUSAAs the world’s largest economy, with the third largestpopulation, the same language and similar consumerdynamics, the USA provides ample opportunities for UK foodand drink exporters. Exports to the USA have grown overthe past ten years by 147% from 0.9bn in 2008 to 2.2bnin 2018 driven by strong growth in a diverse range ofproducts7. More than half the sales value in 2018 came fromwhisky exports at 1.1bn, followed by gin and salmon8.Top 5 UK food and drink exports to the USA 2018Cereals & flourSauces, extracts & ice-creamBeerFish & seafood 77.2m 89.4m 106.8m 187.8mSpirits 1.4bnExport value ( )Data Source: Her Majesty’s Revenue and CustomsFood and drink exporters targeting the USA can benefitfrom the support of an active Department for InternationalTrade (DIT) presence focussed on food and drink, whichprovides excellent support for UK exporters. Exporting to theUSA can be challenging due to the high number of marketaccess barriers – both technical barriers to trade (TBT) andsanitary and phytosanitary (SPS) barriers – as well as differingstandards for quality checks or ingredients. This can make it acomplex and challenging market for food and drink exportersand justifies industry’s request for further resources to supportand promote UK food and drink exports.Her Majesty’s Revenue & CustomsSantander Data sources: All from public domain including, Food & Drink Federation (FDF),Food & Drink Exporters Association (FDEA) and Her Majesty’s Revenue & Customs (HMRC).7,8Food and Drink Industry Report 2020Santander’s insightsThe USA is also the largest export destination for the foodand drink sector outside the EU. During the first six months of2019, export trade amounted to 1.1bn which represents a 11%increase YOY, and therefore remains a great opportunity for UKmanufacturers.Food and drink revenue in the USA amounted to over US 2000bn in2018 where US 742bn of this represented store sales. As such, themarket for the food and drink industry is forecast to grow at an averageof 11% per annum to 2023. (ref Statistica)We know that the supply chain for food and drink (F&D) imports to theUSA is complex and sometimes daunting for many exporters. There’s aneed to build relationships and make arrangements with many partners inthis chain and in most cases an importer, broker, agent and distributor areall required in order to get the product to market. Therefore we’re workingdirectly with five main distributors in the USA, who are very experiencedin importing UK brands. These partners are supporting UK companiesby easing some of the difficulties that come with finding suitable contactswithin this chain and simplifying the overall supply chain process.These distributors share market intelligence regarding product demand,trends and category gaps, which we then match to UK companies.These UK manufacturers can then build relationships with the distributorswho will manage their brands and sales in this significant market.We recently took ten UK companies to the Summer Fancy Foodtrade show in New York. Many of these companies had already beenintroduced to appropriate distributors ahead of the visit, and the showwas used to further explore opportunities and agree initial orders.We’re continuing to work with our cohort of distributors which serviceWholesale, Retail, Foodservice and e-commerce channels in the Statesin order to develop opportunities (in relation to category demand) forF&D companies in the UK.Food and drink revenue inthe US amounted to overUS 2000Bn in 2018where US 742bn of thisrepresented store sales.Page 7

Developing MarketsChinaStrong economic growth and increasing urbanisation in China are drivingrapid growth in the middle class and with it the purchasing power of its1.4bn consumers. While current rapid UK export growth to Chinais dominated by commodity sales, there is also a significantopportunity to grow sales of premium products, with an emphasison provenance, quality, health and sustainability. The top five productsexported to China in 2018 were pork ( 77m, 11%), whisky ( 77m, 25%)and salmon ( 73m, 4%)9.Top 5 UK food and drink exports to China 2018Cereals & flour 69.5mMeat 79.8mSpirits 81.9mDairy & eggs 82.0mFish & seafood 138.0mExport value ( )Data Source: Her Majesty’s Revenue and CustomsExporting to China, is not without its challenges, not least because ofregional cultural variations which require a sophisticated approach to identifyand develop export opportunities. As a result, many successful exportersbegin with a highly targeted strategy focusing on major cities. To supportUK food and drink, the Agriculture and Horticulture Development Board(AHDB) and Department for Environment, Food and Rural Affairs (Defra) cofund a dedicated food and drink specialist. This provides a strong foodand drink focus in market and has helped open new market accessopportunities, increasing the volume and value of UK exports. FDF isworking with the government to replicate this model for branded food anddrink, to better support UK businesses seeking to export to China.Santander’s insightsWe can see the opportunities for export to Chinaare clear from its pure scale and growth rates.Chinese imports of food and drink were wortharound 54bn in 2018, where they sourced goodsfrom 93 countries, again showing that there aregreat opportunities for UK Manufacturers in China.UK food and drink exports to China grew by 10% YOYin 2018 to 623m. During the first six months of 2019,export trade was seen at 344m representing a 16.2%increase YOY.As with many destinations globally, gaining traction withthe right partners in China is sometimes difficult and thisdissuades UK exporters from attempting to access thislucrative and growing market. In order to assist companieswho want to trade with China, we’ve partnered with twoUK based consolidators who specialise in exports tothis market. Together, we’ve created a streamlined andsimplified the process for UK companies.Chinese imports offood and drink wereworth around 54bnin 2018,where theysourced goodsfrom 93 countries.This consolidator model has many benefits for UKcompanies. The consolidator has the experience inmarket, established distributor and buyer contacts,facilities to assist product certification/licensing as wellas the efficiencies for export logistics. This provides asolution to many of the issues faced by UK companies,assisting the growth of exports to this market.The consolidators are sharing market intelligenceregarding product demand, trends and category gaps,which we then match to UK companies, providing awarm introduction for these demand-led opportunities.Her Majesty’s Revenue & CustomsSantander Data sources: All from public domain including, Food & Drink Federation (FDF),Food & Drink Exporters Association (FDEA) and Her Majesty’s Revenue & Customs (HMRC).9Food and Drink Industry Report 2020Page 8

Developing MarketsIndiaIndia is a key market for the UK food and drink industry,worth 163m10 in 2018 and one that FDF has prioritised inpartnership with both Santander and the UK India BusinessCouncil (UKIBC). FDF CEO Ian Wright has led a range ofin-market activities, including a Trade Mission to Delhiand Mumbai earlier this year. Delegates representing some ofthe UK’s biggest food and drink businesses and organisations,showcased UK food and drink at the India Food Forum.Santander’s insightsIndia is a country with 1.3bn consumers with increasingdiscretionary incomes and varying food patterns.Although currently not in the Top 20 destinations forUK food and drink exports, we’ve identified clearopportunities for UK companies to engage with thevibrant 305bn Indian food market, which is expected toreach 500bn by the end of 2020.India is a key growth area, with UK exports growing by 265%over the last decade from 45m to 163m11. In 2018, UK spiritswere a significant source of growth to India, with their value risingby 34.9%; making spirits the fastest growing category amongthe UK’s top 10 food and drink exports to India.Navigating trade with an emerging market is not easy, whichis why we’ve developed a network of partners in India to helpUK businesses that wish to explore and take advantage of thepotential that prevails. These include Yes Bank (our partnerbank) and Sannam S4 who are on hand to help UK companiesexplore, enter and expand in this dynamic market.Top 5 UK food and drink exports to India 2018In addition, we’re aligning plans with five key food anddrink distributors in India, covering the major cities andmain channels to market. The distributors are sharingmarket intelligence regarding product demand, trends andcategory gaps, which we then match to UK companies. UKmanufacturers then build relationships with the distributors whowill manage their brands and sales in this significant market.Cereals & flour 2.0mPrepared fruits, vegetables & nuts 2.4mAnimal feed 3.5mSauces, extracts & ice-cream 4.2mSpirits 142.6mExport value ( )Data Source: Her Majesty’s Revenue and CustomsHowever, high import tariffs mean UK food and drink has notyet been able to fulfil its export potential in India. To addressthis issue, UKIBC recently put in place a dedicated food anddrink specialist in India to enhance the essential support thatis available to UK businesses.10,11Her Majesty’s Revenue & CustomsSantander Data sources: All from public domain including, Food & Drink Federation (FDF),Food & Drink Exporters Association (FDEA) and Her Majesty’s Revenue & Customs (HMRC).Food and Drink Industry Report 2020We’ll be leading a trade mission to India focused around amajor food show in Q3 2020. In addition, we will be supportingWorld Food India later in 2020. This event is becoming oneof the world’s largest as India aggressively develops its FoodPark projects. This provides opportunities for UK companiesinvolved in food manufacturing, food brands and thesupply chain, including packaging, refrigeration, cold chain,processing, food machinery and foodservices.There are manyopportunities for UKcompanies to engagewith the vibrant 305bnIndian foodmarket,which isexpected toreach 500bn bythe end of 2020.Page 9

Developing MarketsThe United Arab Emirates (UAE)The United Arab Emirates (UAE) has a population of 8.6m peoplein the UAE, of which 88% are foreign citizens12. FDF membershighlighted the UAE as one of the top three untappedmarkets they would like to target based on the country’sscale, sizeable middle class and appetite for qualitywestern products13. Packaged food sales are popular with localconsumers who enjoy the convenience and variety of productsand continue to grow in the UAE, reaching a value of US 4.7bnin 201614. The UK already sells a range of products to the UAE,with whisky ( 148m, 13%), breakfast cereals ( 31m, 4%) andchocolate ( 15m, -19%) within the top five categories in 201815.Top 5 UK food and drink exports to the UAE 2018Cocoa & chocolate 15.4mDairy & eggs 18.8mSauces, extracts & ice-creamCereals & flour 37.9m 51.5mSpirits 163.5mExport value ( )Data Source: Her Majesty’s Revenue and CustomsThe main barriers food and drink manufacturers report are thecomplexity and costs associated with investing in a market with whichthe company is unfamiliar and the need to identify a distributor. Aspart of the Food and Drink Manufacturing Sector Deal, FDF is workingwith Government to put in place additional specialists in the UAE andGulf region to better support UK exporters.Government of Canada, Consumer Profile - United Arab Emirates, May 201913Grant Thornton, FDF Economic contribution and growth opportunities, June 201714Government of Canada, Market Overview - United Arab Emirates, Global Analysis Report15Her Majesty’s Revenue & CustomsSantander Data sources: All from public domain including, Food & Drink Federation (FDF),Food & Drink Exporters Association (FDEA) and Her Majesty’s Revenue & Customs (HMRC).12Food and Drink Industry Report 2020Santander’s insightsSantander works closely with our in-country partner,British Centres for Business, to support connections withkey distributors and retailers in the Gulf region.The food and drink sector continues to expand in this vibrantmarket and this has been fuelled by increased tourism andleisure, as well as the UAE being a growing global hub.The market has had its challenges, and operators are lookingfor high quality, niche products to help them with differentiation.This is where we believe UK manufacturers can benefit fromthese dynamics and requirements.Operationalrestaurants andcafes in the emirateof Dubai reached11,813 at theend of 2018.UK food and drink exports to the UAE totalled 360m in 2018,representing an increase of 2% YOY. Although Q1 2019slipped by 8% with exports of 75m, the opportunities in Dubaiare significant and this particularly applies to UK manufacturerswho are able to supply the food service sector.Food service customer numbers compare with Paris and London- Dubai, has more restaurants per million population than NewYork and operational restaurants and cafes in the emirate of Dubaireached 11,813 at the end of 2018. The region currently has 700hotels with over 110,000 rooms and plans to increase capacity toadd almost 20,000 rooms over the next twelve months.Following a successful trade mission at the end of 2018, we’rehelping UK manufacturers gain access to Emirates Flight Catering,Emirates Leisure & Retail Group, and Maritime & MercantileInternational (MMI). MMI supplies major franchises, hotel groupsand several airlines as well as controlling all alcohol into the UAE.Retail connectivity points include Lulu, Spinneys and Al Maya.We took another nine companies to the UAE in November 2019for bespoke meetings with key buyers in both retail and foodservice channels. EXPO 2020 provides further opportunity, withan expected 25 million visitors, and we’re in close contact withdistributors who are sourcing products for this major event next year.Page 10

Workforce PressuresThe UK economy as a whole is facing workforce pressures with newrecords being set in official statistics that demonstrate the tightness of thelabour market. The latest unemployment figures of less than 4% are thelowest seen since 1975. Furthermore, 76% of the adult population are inemployment (the joint highest on record) and yet there are still a 813,000vacancies waiting to be filled nationwide.The effects of these tight labour market conditionsare reflected in the findings of our Q3 2019 Food &Drink Business Confidence Report. As an industry,food and drink manufacturing will need 140,000new recruits by 2024 to meet the expectations ofa predicted UK population of 69 million people.However, 42% of food and drink businesses expectthe supply of permanent workers to decreasein 2019, compared to just 6% who think it willincrease. Food and drink businesses are even moreconcerned about the availability of temporary labour,87% expecting this to decrease this year and noneexpecting it to increase.It is also crucial that food chain businesses and thegovernment redouble their efforts to upskill and trainthe UK workforce to meet the skills requirementsof the future. FDF is working to support domesticworkforce and skills requirements in partnershipwith government and other food supply chainorganisations through the Food and Drink SectorCouncil , who have published ‘Preparing for aChanging Workforce’ report.Over a quarter of food and drink manufacturing’smore than 450,000-person workforce are fromthe EU, working in roles at all skill levels. Workersfrom the EU make up 12% of the 4 million peopleworking across the entirety of the UK food chain.Therefore, working with government to secure anew immigration system that allows businesses fromacross the food chain to access the labour they needis a key priority for FDF.Food and Drink Industry Report 2020Page 11

Developing AutomationThe UK has a strong R&D base for food and drink manufacturing in the UK ashighlighted by the ‘Made Smarter Review’1 which outlined a potential 55.8bnvalue to our industry through the adoption of known digital technology overthe next decade. However, food and drink manufacturing lags behind othermanufacturing sectors in terms of technology adoption and process engineering.2Food and Drink Industry Report 2020World average: 74 robotsUK: 71 robots (22nd lyDenmarkJapan0New ZealandMade Smarter Review, Professor Juergen Maier, CEO Siemens UKInternational Federation of Robotics, February 2018 press releaseAlthough there is no active movement around the sectordeal negotiation, FDF, stakeholders and partners arehopeful that negotiations will be resumed in the near future.700Czech Republic1In early 2019 both industry and government agreedto put the Sector Deal negotiations on hold, due tothe political uncertainty and the stretched resourcesof both sides, and was approved by FDF’s President’sCommittee and Board. We continue to see significantbenefits to the sector for the adoption of technologyand support to businesses in this area. On this basis,our advocacy for industry and Government coinvestment and promotion of the opportunities remain apriority for FDF.Number of installed industrial robots

food and drink industry will be a vital element of business and output in the UK, both domestically and internationally. The food and drink industry is the UK's largest manufacturing sector, contributing 31.1bn to the economy annually and employing 450,000 people. It is a key part of the nation's 121 billion 'farm to fork' food chain.

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