Skip To The Main Content

Hearty appetite: How small firms are the focus of the food and drink sector

The UK’s food and drink sector is constantly evolving, with new trends countering challenging market conditions. Small firms are a crucial part of the mix.

DeepDive-July_large

The UK’s agri-food sector contributes £121.7 billion a year to the UK economy, according to figures from the Department for Environment, Food and Rural Affairs, and includes everything from the manufacture of products for sale in shops or restaurants, cafés and street food outlets to the export of finished goods to overseas markets. 

According to Government figures, there are approximately 7,030 micro, small and medium-sized enterprises in the food and drink sector, with total turnover of around £25 billion and 110,000 employees in 2018.

In the food sector, excluding beverages, such firms accounted for 96 per cent of businesses, 25 per cent of employment and 25 per cent of turnover. Around a third of the small businesses operating in this area are manufacturers of bakery products.


In the drinks space, UK sales of beer and soft drinks remain strong, but the most notable trend has been the rise in popularity of gin – sales have increased by 267 per cent during the past decade.

In the food sector, the domestic market is particularly strong, with 78 per cent of consumers saying it is important to support British farmers. A rise in demand for healthy foods and the push towards vegetarianism and veganism has also boosted the sector.
Another trend which is encouraging people to set up businesses in this space is the popularity of street food and food halls.

While high street restaurant chains have struggled in recent years – Byron Burger, Prezzo and Zizzi, Polpo and Café Rouge have all embarked on store closures after the market reached saturation point – street food has become a common sight, benefiting from lower set-up and operating costs and the ability to move to where customer demand is. 

However, the industry as a whole is facing a number of challenges. Rising input costs as a result of food price inflation are having an impact on profit margins, while increased packaging costs, staff shortages, rising wage bills and energy costs are beginning to bite.

More general issues, such as high business rates and rents and a lack of free parking, are also creating obstacles, while businesses in rural areas without access to reliable broadband can find it hard to compete with outlets able to operate a digital offering.

For those starting up food or drink businesses, funding can also be a challenge, with organisations often having to fund machinery and premises before they can generate significant returns. FSB recently teamed up with Le Cordon Bleu to launch its annual Julia Child Scholarship, which provides an opportunity for someone with a food or drink business idea to get their business up and running. 


“Despite the pressures facing many small businesses – particularly those on the high street – there’s a world of opportunity to succeed as a food and drink entrepreneur,” says Mike Cherry, FSB National Chairman, who will sit on the judging panel. “The scholarship this year is looking to reward someone with an innovative food or drink business idea and we look forward to helping them with FSB membership and business advice.”

The scholarship is worth more than £40,000, and the winner will be presented with an award by Mary Berry. They will also receive an internship at The Savoy and mentoring from Luiz Hara, Georgia Green, Dhruv Mittal and Evelina Ogorzalek, as well as winning 12 months’ FSB membership.