Confidence among UK food and drink manufacturers has fallen to its lowest level since the energy crisis, as businesses warn that disruption from the Middle East conflict will push up costs and force prices higher.

The Food and Drink Federation’s latest State of Industry report found business confidence in the sector dropped to minus 64 per cent in the first quarter of 2026.

The trade body said this was the lowest level recorded since the aftermath of Russia’s invasion of Ukraine in 2022 and was broadly in line with the lows seen at the start of the Covid pandemic.

The outlook for the coming quarter also remained sharply negative, with confidence for the second quarter standing at minus 51 per cent as manufacturers expect conditions to deteriorate further.

The FDF said food and drink businesses were being hit by global supply chain disruption, higher energy prices, rising packaging costs and increased transport costs linked to the war in Iran.

A fifth of food manufacturers said energy now accounts for more than 10 per cent of their total operating costs, while almost one in 10 said it makes up between 20 per cent and 24 per cent.

Plastic packaging costs have risen by up to 15 per cent for some businesses, while others reported transport cost increases of more than 20 per cent.

The FDF also warned that higher fertiliser costs could feed through into ingredient prices, with the Gulf region responsible for around 30 per cent of global urea production.

The report found 82 per cent of food and drink manufacturers expect to raise prices to cover rising costs.

A third of businesses said they were planning to restructure or reduce headcount, while the same proportion expect to cut marketing spend. More than a quarter said they would pause or cancel investment projects, and 21 per cent expect to reduce staff training.

FDF chief executive Karen Betts said it was “unsurprising” that confidence was low after a series of shocks over the past five years.

“Companies in our sector have been hit by a series of shocks over the past five years and now face significantly rising energy and other costs because of the war in Iran,” she said.

“In the last inflation spike, companies made savings to absorb some of their rising costs, but now there’s little flexibility left to do this again.”

Betts said manufacturers were also facing pressure from incoming regulatory changes, including recycling reforms, employment law changes, EU alignment and proposed changes to health-related food rules.

“Food and drink isn’t something people can go without,” she added. “It’s an everyday essential, and the cost rises caused by energy prices and regulatory costs have consequences in homes everywhere.”

The FDF is calling on the Government to provide targeted and time-limited support on energy prices during the crisis, focused on the categories most exposed to energy costs.

More than two thirds of manufacturers said energy cost support should be a priority, while 38 per cent called for packaging recycling reforms to be simplified.

A third want a phased introduction of the Employment Rights Act, 28 per cent are calling for a delay to proposed changes to the Nutrient Profiling Model, and 23 per cent said realistic transition arrangements for the upcoming EU trade deal would help ease pressure.

The FDF has warned that food and drink inflation could reach at least 9 per cent by the end of the year without action to stabilise costs.