Jane Clark-Hutchison: Bright times ahead

Delegates at The Scotsman's food and drink conference sampled some of Scotland's finest produce. Pic by Jon Savage.

Targets for the food and drink sector appear to be achievable.

In the last ten years food and drink has established itself as Scotland’s most energetic, internationally-renowned industry. Today it is our largest manufacturing sector, employing over 34,000 people and turning over a record £14 billion a year, with an ambitious target of increasing this figure to £16.5bn by 2017.

I believe this goal is well within reach – and The Scotsman’s annual food and drink conference, sponsored by Bank of Scotland, confirmed the bright outlook for the sector mapped out in our latest food and drink report.

Despite uncertainty following the EU Referendum, I’m confident the enthusiasm and pride in Scotland’s offering shown by the food and drink business community at Tuesday’s conference will continue to take the sector from strength to strength.

The Scottish food and drink sector has a lot to be proud of. It has capitalised on its heritage, provenance and credentials as a community of independent, craft producers to cultivate a brand with currency domestically and overseas.

As a result, growth expectations continue to improve at a pace, and Bank of Scotland’s fifth annual food and drink report, a bellwether of the industry’s health, supports predictions of a lucrative future.

Scottish food and drink businesses expect to increase turnover by an average of 24 per cent over the next five years, an increase of 5 per cent compared to last year.

This optimism is reflected in firms’ investment strategies. On average, food and drink businesses will invest 56 per cent of their current annual turnover in the next five years.

For firms with a turnover of over £750 million, this increases to 68 per cent.

This investment will also pay dividends in the wider Scottish economy, with job creation and inward investment on the cards.

With 36 per cent of firms telling us they will grow through recruiting more staff, it is predicted more than 14,000 new roles will be created over the next five years.

Diversification and innovation will also play an important role in growth, with 49 per cent of businesses planning to enter new markets in the UK and 45 per cent looking to invest in new product development by 2021.

A common theme touched on by conference speakers was the potential impact of the EU Referendum.

Currently 30 per cent of the industry’s workforce is made up of EU nationals and 80 per cent of its exports go to Europe. So the result will inevitably have implications.

Our report was commissioned following the result of the referendum, so it is encouraging to see 69 per cent of responding businesses planning to engage new international customers over the next five years. Also, 52 per cent of firms said the result had led to an increase in investment plans.

Scotland’s food and drink offering consistently outperforms the rest of the UK in terms of exports.

Taking advantage of the good reputation of Scottish produce in international markets scores particularly highly in our survey.

Some 87 per cent of all respondents are already capitalising on the reputation of Scottish produce, up from 71 per cent last year.

Small and medium-sized businesses scored particularly highly here, with 91 per cent making use of the good standing of Scottish produce.

Just over half of all firms plan to use clearer labelling and packaging, while 86 per cent of large companies say they are increasing spend on retail marketing campaigns to capitalise on provenance.

Scottish producers are also looking to take advantage of the growing consumer interest in locally-sourced products, organic foods and awareness of ingredients. Increased spend on traceability marketing will be used to do this, with 71 per cent of large firms saying they intend to put plans in place to progress this.

While the outlook for Scottish food and drink is positive, working towards the future won’t be without its challenges.

Alongside the UK’s exit from the EU, our report also uncovered what firms foresee as the major challenges facing the sector going forward, including increasing overseas competition (30 per cent), rising labour costs (28 per cent) and a lack of skilled labour (26 per cent).

Firms will have to face these headwinds, but they are not alone. There is so much support that they can call on, and working with advisers and agencies to identify and mitigate potential risks will prove fundamental to future growth.

The confidence and investment plans highlighted in our report demonstrate the sector’s resilience against the shifting nature of the UK’s economic landscape. This is an industry bursting with confidence, creativity and credibility.

I have no doubt the sector will continue to make a fantastic contribution to both Scotland’s economy and its national identity.

Jane Clark-Hutchison is regional director and head of food and drink at Bank of Scotland.