IN Brief:
- Food and drink manufacturing confidence fell to -64 in Q1 2026.
- Energy, transport, ingredients, packaging, labour, and regulation remain central cost pressures.
- Weak confidence is colliding with investment demands around automation, resilience, compliance, and productivity.
The Food and Drink Federation has reported a sharp fall in UK food and drink manufacturing confidence, with its Q1 2026 reading dropping to -64.
The figure is the weakest since the 2022 energy crisis and marks a steep decline from -31 in the previous quarter. The FDF’s State of Industry data points to a sector facing renewed pressure from energy, transport, ingredients, plastic packaging, cleaning chemicals, labour, regulation, and weaker confidence over domestic sales.
Manufacturers expect the pressure to continue into the next quarter, with the outlook confidence score for Q2 standing at -51. The report also states that 82% of manufacturers expect to raise prices, while businesses are looking at procurement changes, lower marketing spend, workforce restructuring, and paused investment to manage costs.
The latest reading reverses the limited improvement seen at the end of 2025. In FDF data flags downbeat festive quarter, the Q4 confidence score had improved from the previous quarter but remained negative. Q1 has pulled the sector back towards the conditions associated with major cost shocks.
Food and drink manufacturing is particularly exposed to this combination of pressures because many plants run energy-intensive processes and operate on tight retailer-driven margins. Refrigeration, heat, steam, compressed air, water treatment, cleaning regimes, cold storage, and temperature-controlled logistics all add cost when energy and transport markets harden.
Packaging adds another layer of complexity. Extended Producer Responsibility, deposit return planning, recyclability targets, artwork changes, retailer specifications, and data requirements are shifting packaging from a procurement task into a technical compliance function. The detail involved in beverage pack readiness was examined in UK DRS rules shift packaging to specification, where barcodes, container recognition, and scheme requirements moved packaging decisions into plant-level planning.
Those requirements are arriving while companies are also being asked to invest in productivity, traceability, automation, reformulation, hygiene, and energy efficiency. A weak confidence reading does not stop capital expenditure entirely, but it changes the way boards assess payback. Projects that improve labour efficiency or cut waste may continue, while discretionary upgrades and longer-term capacity projects become harder to approve.
That creates an uncomfortable operating pattern. Older lines can be more labour intensive, harder to clean, less energy efficient, and less adaptable to new packaging formats. Delaying upgrades protects cash in the short term, but it can leave production sites less able to meet retailer demands, compliance requirements, and margin targets over the next cycle.
Labour remains part of the equation even where vacancy rates have eased. The FDF reported that the sector vacancy rate fell to 3.9% in Q1, down from 5.0% in Q4. Lower vacancies do not automatically remove workforce pressure, particularly where plants need skilled maintenance engineers, line leaders, QA teams, automation specialists, and technical managers capable of delivering change under cost constraint.
Food manufacturers also have less pricing flexibility than many industrial sectors. Retailers remain intensely focused on affordability, and shoppers are still sensitive to price movements across staple categories. When energy, packaging, transport, and ingredient costs rise together, manufacturers are pushed towards a difficult mix of price negotiations, specification changes, efficiency programmes, and cost absorption.
Government policy will remain closely watched because the sector is carrying several regulatory transitions at once. Energy support, realistic transition timelines, packaging reform, SPS arrangements, and nutrient policy all influence investment decisions. Manufacturers can absorb change more effectively when deadlines, data requirements, and enforcement expectations are stable enough to plan against.
The confidence score captures more than sentiment. It shows a manufacturing base being asked to modernise while operating conditions weaken. Without enough investment headroom, productivity gains become harder to secure, and the cost of compliance rises further. Food and drink manufacturing has already shown resilience through repeated shocks, but resilience built on deferred investment is not a long-term industrial strategy.
