By Ashley Clarkson

F&B Specialist

Grant Thornton Northampton

WHILE 2016 was a strong year for the food and beverage (F&B) sector, the industry continues to face several complex challenges which have the potential to impact business growth over the coming months. To succeed, firms need to remain resilient and focus on innovation as they have done in the past when facing similar levels of uncertainty.

The F&B sector is an integral part of the business landscape here in Northamptonshire employing nearly 50,000 people. 2016 was a successful year for the industry and we saw several stand out transactions including the sale of Northampton-based pie manufacturer Dunkley’s to The Billington Group.

Nationally, Grant Thornton facilitated 25 transactions in the sector – a 56 per cent increase on the previous year. However, underlying challenges remain as food and drink businesses continue to operate in an uncertain and volatile environment.

The fall in the value of sterling following the Brexit vote has pushed up the cost of importing raw materials and packaging. Food inflation also remains a key issue with many predicting this is likely to increase further over the coming months.

As a result, food manufacturers are facing squeezed profit margins and are struggling to pass on these price increases to retailers who are highly resistant to any rises in an already competitive environment.

The triggering of Article 50 could also see a reduction in the availability of overseas labour. With almost a third of the current F&B sector’s workforce made up of EU nationals, this could further exacerbate the skills shortage leading to increased employment costs as businesses try to recruit and retain staff.

The higher National Living Wage announced in April is also forecast to cost the hospitality sector more than £13 million in increased salary bills over the next three years as employee pay has historically been close to the minimum wage.

Despite these challenges, time and time again the F&B sector has demonstrated it is innovative, resilient, resourceful and able to quickly adapt to changing circumstances.

Businesses would do well to focus on developing or expanding their products and ranges to maintain a competitive edge. There is also greater opportunity for exporting as the weaker pound has made the UK more competitive, resulting in a strong overseas appetite for homegrown goods.

The F&B sector is still ripe for investment opportunities and we expect M&A activity to remain robust throughout 2017. The upcoming health check of the local economy provided through our annual Northamptonshire Limited report will provide a more detailed insight into how the sector is faring.

More information is available at www.grant-thornton.co.uk.