The majority of Scotland's food and drink sector expects growth of up to 20 per cent in the next year, according to a report.

The sector, which already has a turnover of almost £11bn a year, is expected to expand through rising business confidence, product innovation and investment in automation, according to business advisory firm BDO LLP.

The report suggests 86 per cent of firms predict revenue growth of up to 20 per cent in the next year.

Nearly two-thirds of firms surveyed said new product development would be a major source of growth, while many also believe access to new UK markets and export markets will be increasingly important.

Pricing pressures remain the top challenge for the sector, according to 82 per cent of companies surveyed, with skills shortages and the volatility of raw materials joint second.

BDO LLP also warned the proposed sugar tax could hit performance.

Researchers say the challenges facing the industry are being counter-acted by product innovation, improved management and increased investment.

Martin Gill, head of BDO LLP in Scotland, said: “Pressures on pricing and margins remain hugely challenging, but the overall sentiment of the sector is a positive one.

“It’s been a tough few years for food and drink companies, but it appears they are strongly focusing on future growth.

“It is well known that the manufacturing sector plays a critical role in rebalancing the Scottish economy and driving long-term sustainable growth, so it is essential that the sector receives all of the Scottish and UK government support possible.”

He added: “The proposed tax on sugar will have a huge impact on food and drink manufacturers and could dent the current performance of the food and drink sector.

“The Chancellor needs to be cautious in considering any additional taxation on sugar and ensure that he supports the food and drink sector in his Budget next month.”

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