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- All seven manufacturing subsectors monitored by the tracker experienced cost increases
Food and drink producers posted the biggest output growth of any sector last month as inflationary pressures pushed up manufacturing prices, recent data show.
Stronger demand helped the UK food and drink manufacturing industry score 59.2 in the Lloyds Bank UK Sector Tracker for July, up from 56.9 the previous month.
Any number above 50 indicates expansion, while any number below 50 denotes contraction.
Tasty: Food and drink producers posted the biggest output growth and price increases of any sector last month, according to the Lloyds Bank UK Sector Tracker
However, the research also said that sustained cost pressures led food and drink makers to raise prices at the fastest pace of any industry and much more than in June.
All seven manufacturing subsectors monitored by the tracker recorded cost increases in July for the second time since 2022, while cost inflation in manufacturing hit its highest level since January 2023.
Lloyds said many businesses were experiencing high shipping costs, with service sector firms citing the problem at around 6.5 times the long-term average, as well as higher staff costs.
Dave Atkinson, UK manufacturing director at Lloyds Bank, said: ‘The food and drink manufacturing sector has faced acute and sustained cost pressures recently.
‘While current data suggests that many companies are able to absorb this, they may be considering how sustainable it is in the long term.
‘Balancing pricing strategy while maintaining a competitive advantage will be the goal for many companies as they closely manage working capital to ensure they can maintain financial resilience.’
The sectors that experienced lower production were tourism and recreation, with a score of 40.4, and technological equipment manufacturing and transportation, with readings of 44.4 and 48.3, respectively.
However, nine of the 14 sectors examined by the tracker, including health services, real estate and software, reported growth in output and new orders, one more than in June.
The Lloyds figures come days after a report by the Food and Drink Federation said almost 90 per cent of food and drink manufacturers expect to maintain or increase investment levels over the next year.
The trade body said the figures were a sign the industry had “moved past the crisis” after five years of “political turmoil and external shocks” and investment levels plummeting by a third since 2019.
However, he warned that manufacturers remain concerned about political and regulatory uncertainty, as well as non-tariff barriers such as health certificates, which are an obstacle for 40 percent of companies.
Bal Dhoot, FDF’s Director of Sustainability and Growth, commented: ‘By working in partnership with the government we can leverage investment opportunities and remove barriers to growth.
“It is crucial that the government helps establish a stable business environment that removes the burden of unnecessary and costly regulation and bureaucracy.”
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