UK Food and Drink Firms Prepare Price Hikes and Job Cuts Amid Rising Energy Costs- A growing number of UK food and drink manufacturers are preparing to raise prices and cut jobs as soaring energy and labour costs continue to put pressure on the industry, according to a new survey by the Food and Drink Federation (FDF).
The trade body revealed that 82% of food and beverage businesses expect to increase prices in an effort to cope with rising operational expenses, while one in three companies are planning workforce reductions or restructuring measures.
The findings, based on responses from manufacturers of varying sizes across the UK, highlight mounting concerns within one of the country’s largest manufacturing sectors. Industry leaders warn that continued inflation and high energy prices are forcing businesses to make difficult decisions to remain financially stable.
The FDF also reiterated its earlier forecast that food and non-alcoholic drink inflation in the UK could reach between 9% and 10% by December, raising concerns over additional pressure on household budgets in the months ahead.
According to the report, the latest economic strain stems largely from the ongoing conflict involving Iran and the resulting global energy shock. The federation cited analysis from the International Energy Agency (IEA), which described the current situation as one of the worst energy crises in modern history.
The FDF said the industry is facing a period of sharply rising costs rather than shortages of goods or supplies. Businesses are now being forced to absorb higher expenses across manufacturing, transportation, and labour while attempting to protect already tight profit margins.
Beyond raising prices and reducing staff, companies are taking several other measures to manage the financial impact. Many businesses said they are changing procurement strategies, cutting marketing budgets, and delaying or cancelling capital investment projects.
Despite growing pressure from energy prices, only 21% of surveyed businesses said they planned to improve production energy efficiency, suggesting that many firms may lack the financial flexibility needed to invest in long-term infrastructure upgrades.
The survey also showed a sharp deterioration in business confidence across the sector. The FDF said industry sentiment has fallen to levels comparable to those seen during the COVID-19 pandemic.
The federation’s net confidence score dropped to -64% in the first quarter, compared with -31% in the final quarter of 2025, reflecting increasing concern about future trading conditions.
Around 67% of respondents reported that business conditions had worsened compared with the previous quarter, while confidence expectations for the next quarter also remained deeply negative. The report noted that the outlook confidence reading for Q2 fell to -51%, marking the weakest level since the federation began tracking the data in early 2022.
Energy costs remain one of the biggest challenges for manufacturers. According to the survey, 69% of businesses believe government support with energy costs would be the most effective measure to ease pressure on the industry.
For many companies, energy now represents a significant portion of operating expenses. The report found that 51% of respondents spend between 5% and 9% of their total costs on energy, while for 8% of businesses, energy accounts for as much as 20% to 24% of overall costs.
At the same time, rising labour costs are continuing to reshape operations across the sector. More than half of surveyed businesses said increasing wage pressures are accelerating the shift toward automation and technology-driven production systems.
The report also found that 47% of companies said rising costs were affecting employee bonus structures, while 36% pointed to growing pressure on pay differentials within their workforce.
Industry leaders warn that if energy prices and inflation continue climbing, both businesses and consumers are likely to face further challenges in the coming months. Higher food prices could place additional strain on households already dealing with broader cost-of-living pressures, while manufacturers may continue scaling back investment and hiring plans.
The FDF has urged the UK government to provide stronger support measures for the food and drink sector, particularly around energy costs, warning that sustained pressure could weaken production capacity and slow long-term growth in the industry. Scientists Just Found a New Way to Slow Aging (2026 Update) | Maya
