Nearly half of food and drink manufacturers are cutting or pausing investment projects as confidence levels in the industry are at an 'all-time low'.
Firms in the sector face the toughest trading conditions 'anyone can remember', according to new research by the Food and Drink Federation (FDF).
Companies are now urging the Chancellor to provide economic and energy stability, prioritise measures which will drive growth and cut the cost of doing business in the upcoming Autumn Statement.
The latest survey from the FDF suggests companies have seen input costs increase by an average of 21% over the past 12 months, with a similar rise expected next year.
The FDF said businesses were 'doing what they can' to contain soaring prices for consumers by achieving energy efficiencies and reducing their product ranges, but 'confidence is fragile'.
The effect of these mounting costs can be seen in figures from the Insolvency Service showing that in the first eight months of 2022, there were more insolvencies in the food and drink industry than during the whole of 2019.
One of the main pressures on companies is rising energy prices, which accounts for 22% of business costs – up from 12% a year ago.
Given companies bake, chill and freeze food and drink all year round, there are concerns over the longevity of the government's energy support scheme and the need to help firms manage energy price volatility.
Labour shortages also remain a significant brake on growth, with the vacancy rate rising to 9.1% in Q3.
The FDF said the government must review the shortage occupation list and make the apprenticeships levy more flexible to build a more secure pipeline of skills for the industry.
The government should also introduce tax incentives for capital investment, as well as a reduction in the costs of moving goods between the UK and the EU.
The FDF’s chief executive, Karen Betts said confidence levels in the food and drink industry were at an 'all-time low'.
"Soaring energy and ingredient prices [are] putting incredible pressures on businesses, which are at the same time making every effort to keep the price of everyday food and drink affordable.
“Our companies need reassurance that government understands the issues they are facing and will act to help our sector shore up its resilience.
“I hope the Chancellor will act decisively to support our sector next week. This will pay dividends in helping to manage inflation for hard-pressed households.”