Thursday, August 27, 2015

Upgrading and fit-out work dominates UK Food & Drink sector construction output

The food processing industry has performed better than the wider manufacturing sector in recent years and growth is forecast at between 3-4% in the short to medium term. Construction output in the sector is forecast to remain relatively buoyant with growth at a similar level of 3-5% over the next few years. The FDMP sector has recently seen increased capital investment levels, reflecting the growing optimism in the wider economy.

The food and drink manufacturing and processing industry (FDMP) is the single largest manufacturing sector in the UK, employing around 400,000 workers, and exports of food and drink products form an important proportion of UK trade. The value of UK food and non-alcoholic drink exports increased by over 6% in 2014, the 10th consecutive year of record growth. Exports of UK dairy are also at a record high.

The market is polarised, with over 8,000 companies active in the FDMP sector across the UK, and over 85% of enterprises qualifying as small. However, the top 5 UK food companies account for over £30bn in terms of turnover, with the leading 20 food producers operating over 300 manufacturing and distribution sites across the UK. In total, there are over 9,500 manufacturing sites and factories in the UK FDMP sector, with the bakery, meat processing and dairy industry operating the largest number of processing sites and accounting for the highest turnover. FDMP activity varies across the UK, with Scotland, the North West and Yorkshire and Humber having the highest concentration of food processing activity.

The industry is characterised by an ageing stock of manufacturing facilities and equipment, and new projects are mainly focused on upgrading existing assets to achieve greater efficiencies, leading to higher outputs and lower costs. Upgrading and fit-out work therefore accounts for around 80% of total output in the sector. Growing demand in certain sectors has driven capacity expansion, with significant projects in the dairy, beverage, meat and ready meals sectors recently completed or under development. However, with fewer new build factories now being built, there is more of an emphasis on regular maintenance of existing facilities ensuring that machinery and processing equipment is running efficiently.

Going forward, construction output in the food processing sector is likely to remain relatively buoyant, mainly driven by RMI activity, however, the industry faces the ongoing challenges of rising costs, compliance and regulatory controls, EU legislation and political priorities. Therefore construction output is forecast to grow by between 3-5% over the next few years to reach a total of around £475m by 2019.

The impact of the recession and consolidation and rationalisation in the food industry has meant that food manufacturers have become more cautious about investing in new plants and facilities” said Keith Taylor, Director of AMA Research. “However, it seems the current focus is on refurbishment and modernisation projects aimed at improving production capacity and efficiency through initiatives such as automation and temporary processing“.

The ‘Construction Activity in the Food & Drink Manufacturing & Processing Industry Market Report – UK 2015-2019 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at or by calling 01242 235724.

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