Buoyancy baked In – why food and drink in the region is taking adversity in its stride

What’s more, according to the latest government statistics, the region’s food and drink manufacturing industry is worth £2.46 billion in economic value. In terms of output, food and drink accounts for 13.5 per cent of the region’s manufacturing production – the second largest sub-sector behind pharmaceuticals.

Challenging landscape

Food and drink is undoubtedly a key growth driver for the East of England economy, yet like so many UK regions it faces significant challenges.

Consumer sentiment remains fragile, with grocery bills rising in the face of the highest food and non-alcoholic beverage inflation rate in over 12 months, sitting at 4.5 per cent. Producers are also feeling the pinch, as they continue to grapple with increasing costs, from ingredients to employing people.

What’s more, with some of the region’s best-loved brands – from British Sugar, Colman’s to Greene King – also widely exported, companies are contending with global uncertainty and geopolitical risks.

Against this backdrop, surely the food and drink sector should be downbeat? Actually, no. It’s quite the opposite. According to BDO’s Food and Drink Report 2025: Buoyancy Baked In – The Rise of a Resilient Sector, 95 per cent of respondents surveyed as part of the research said they feel positive about their prospects, up from 70 per cent in 2023. That optimism is in part based on rising demand, with two-thirds having seen orders increase over the past year.

Yes, challenges remain, with skills shortages chief among them. Three-quarters of respondents said their businesses lacked skilled people in key roles – up from 50 per cent in 2023, with changes in regulations and pricing pressures from customers also featuring strongly.

But it’s the sector’s ability to ride through the storm – whether it’s a global pandemic, or the loss of major markets and supply routes – that provides many with the optimism needed moving forward. It’s true that the rate of food and drink company insolvencies has almost doubled in the last five years, compared to the previous period, but those that have combined resilience and ambitions have shored up their finances, toughened their supply chains and fine-tuned their business models to withstand further pressures.

M & A activity

This is particularly evident in the M & A market, where the sector has remained active even during times of adversity. Deals in food and drink increased by nine per cent in 2024 – a record-breaking year for M & A. Economic factors were behind many acquisitions, as businesses sought to improve their performance and position in a challenging market.

Unsurprisingly, this also plays out in the report’s survey with more than half of respondents seeking private equity in the next 12 months; a similar number are looking to make acquisitions in the next year.

The reasons driving these decisions are clear – consolidating through M & A can bring economies of scale and make a tangible difference in a competitive market and a difficult trading environment. There are also plenty of opportunities as evolving consumer preferences provide avenues for growth.

For example, in 2024, we saw health-centric foods such as proteins and low-alcohol brands fuelling high activity levels, while pet foods continue to be a hot bed for deals. The bakery category is also seeing consolidation and PE interest in unique propositions.

Examples in the East of England market include the acquisition of Handmade macaron’s supplier Hilton Macarons by fellow East Anglian business Two Magpies.

The pressures and opportunities in the food and drink industry will come in equal measures over the next 12 months and will continue to underpin M &A activity in the market. What’s clear is that despite an economic outlook which remains uncertain, the sector remains confident about its prospects in the year ahead.