Food & beverage
A growing appetite and unquenchable thirst for British food and drink has led to a hugely profitable sector that generates billions of pounds a year.
British households may have felt the pinch in recent times, but food and drink are among the things that people refuse to cut back on. Typically, households spend nearly £5,000 a year on groceries, swelling the coffers of an industry with a £76 billion turnover. Food and drink accounts for 16 per cent of the UK’s total manufacturing sector and employs up to 400,000 people. Moreover, it exports more than £12 billion worth of food and non-alcoholic drink products each year, 77 per cent of which go to the EU. With figures like these, it’s no surprise that the food and drink industry is so coveted.
Sector at a glance
- £1 billion – The amount food and drink companies invest in R&D each year
- 12% – The industry’s labour force productivity has increased by this much during the past 10 years
- Two-thirds of all British agricultural produce is bought by UK food and drink companies
Food & Beverages and the economy
Whether times are good or bad, the British food and drink industry always performs strongly. During the past four years, the sector has grown by at least 20 per cent, fuelled by high demand for delicious dishes and tasty beverages.
From 2009–10, the sector experienced its biggest jump in revenues, with companies generating an average 33.2 per cent rise. The following two years saw food and drink companies’ revenues climb by 29.8 per cent and 20.2 per cent respectively.
The British public still has a big appetite for homegrown consumables, judging by the Food and Drink Federation’s latest figures. In Q3 2013, sales grew by one per cent, aided by good weather and stronger consumer confidence. During the same period, valued added exports climbed by eight per cent as the Eurozone markets recovery continued.
Another positive finding was that food and drink manufacturers expected continued growth in the run-up to Christmas.
In the business of lending
Commentary by Anthony Browne, Chief Executive, British Bankers’ Association
SMEs bind our communities together through the jobs they support and services they provide. That’s why the UK’s banks are committed to helping SMEs access the finance they need to invest and grow as the economy turns a corner.
Interest rates are historically low and gross lending is growing, up 11 per cent on last year. That equates to £10.4 billion of new loans in the last three months and approval rates for SME lending applications are over 70 per cent. Yet there is a lingering perception that banks are not, and will not, lend to SMEs – this is not borne out by the latest statistics.
A recent survey by the SME Finance Monitor – the definitive survey of SME sentiment on finance – found that businesses are more pessimistic about their chances of getting money from their bank than they should be. A third of those businesses looking for finance will not even consider asking their bank for a loan, because they assume they will be turned down.
“Interest rates are historically low and gross lending is growing, up 11 per cent on last year”
The reality is much brighter. The same survey says SMEs are twice as likely to gain finance from a bank than they think they are. Lending is stable and cash deposits are on the rise. This suggests that low business confidence stemming from the wider economic climate is discouraging borrowing, but banks are not sitting back while the ‘perception gap’ erodes confidence in the real economy.
Banks are taking action to raise awareness of all the bank-backed programmes in place to help businesses. This includes the national Better Business Finance Programme (betterbusinessfinance.co.uk), which covers the independently administered appeals process for businesses refused finance. Banks have also launched an online mentoring portal (mentorsme.co.uk), with 1,000 bank staff having mentored more than 1,800 businesses to date; and the Business Growth Fund provides equity finance for growth companies.
Meanwhile, the Funding for Lending Scheme has reduced the cost of finance and businessfinanceforyou.co.uk gives businesses the ability to locate the range of finance providers and options in their area.
Here are six practical tips for SMEs looking to get a loan or overdraft: talk to your bank; develop a robust business plan; build your financial understanding; check your track record; be honest in how much money you need; and always keep the dialogue open.
Be under no illusion, Britain’s banks are open for business – and that business is the business of lending.