TIME TO INVEST?
Commercial opportunities for agri-food businesses are shaping up to be the best for many years. In our view, those that recognise and respond to the unfolding situation and position themselves to take advantage of it, have the opportunity to be at the vanguard of the economic recovery in the UK.
Well positioned for the future
Through the recession food manufacturing has proved one of the most resilient areas of manufacturing overall and is well positioned to remain so. It is supplied by one of the most efficient agricultural sectors in Europe which itself now has a great opportunity to expand given the move to a more competitive level of exchange rate. That combined with generally higher prices for global agricultural commodities means that domestic production of food is well placed to increase.
However, the recession has resulted in a permanent loss of food affordability for consumers. Added to the fact that global agriculture has reached a ‘tipping point’ where global demand for food seems more likely to outstrip supply in the next 25 years than lag behind it – a very different situation to the last 50 years – and it starts to become increasingly likely that life will never be the same again for food processors and manufacturers.
The impact of this for farming and food businesses will be an ongoing shift in their focus towards delivering greater value for money and a greater emphasis on production and supply chain efficiencies in addition to developing value added opportunities. Agri-food businesses in the UK are ideally placed to benefit from these changes but to do so they will need to invest strategically for the future. It is therefore good news that our survey suggests that many businesses are not only more confident about the future but that nearly 70% of them are currently preparing to increase levels of investment within their businesses.
Figure 1: Real GDP recovery trajectories.
Figure 3: Relative decline in food manufacturing compared to total manufacturing.
Figure 10: UK food and drink trade balance.
EFFP’s agri-food investment intention survey.
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