Business confidence among food manufacturers and exporters reached a record low this year due to Covid-19 uncertainty, a new report says.
Data by the Food and Drink Federation (FDF) shows that food firms' confidence plummeted -65.2% in the second quarter of 2020.
The industry has faced a 'variety of challenges', from the closure of the hospitality and out-of-home sectors, to rising costs and a fall in exports.
The sector has also seen a reduction in domestic turnover by 8.6% in Q1 compared with Q4 2019, and a further 4.0% decline in Q2.
FDF’s report says that the record low confidence was down to to Covid-19, uncertainty over Brexit and closure of food service.
Separately, Santander carried out research into the impact of Covid-19 on SMEs. It found that 24% of food and drink firms expect to return to normal operating levels by the end of 2020.
Ian Wright CBE, Chief Executive of the FDF, said the pandemic has had a 'seriously damaging impact' on UK food and drink exports.
"These were worth over £23 billion in 2019. While that figure is certain to fall for this year, there are still opportunities in foreign markets for UK food and drink manufacturers to seize in what remains of this year and as we look to 2021.
“As businesses turn toward economic recovery, ensuring a quick return to growth will be essential to support resilience in our industry."
Despite this, there remains 'significant headroom for growth' for UK food and drink exporters, both within the EU27 and other international markets, the report says.
Food firms ranked increased domestic demand, increased export demand and access to new UK preferential trade agreements as well as planned investment in new machinery as key opportunities for the rest of 2020.
The UAE and wider Gulf region, China, and the USA and Canada were identified as potential export growth markets for food and drink manufacturers.
UK food and drink exports are worth more than £23bn annually.