Food Manufacturing Finance: Lines, Packaging, Automation

Food Manufacturing Finance: Funding Processing Lines, Packaging and Automation

Food and drink manufacturing is the largest manufacturing sector in the UK. The Food and Drink Federation (FDF) says it contributes £42bn to the economy, employs 489,333 people and accounts for 23.7% of manufacturing turnover. Yet its own chief executive describes manufacturers as running to stand still, spending to keep existing operations going rather than to prepare for the future.

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A sector under cost pressure

The FDF's Q1 2026 State of Industry survey, published on 28 May 2026, put manufacturer confidence at minus 64%, the lowest since the 2022 invasion of Ukraine. A fifth of manufacturers said energy is more than 10% of their operating costs. Plastic packaging costs had risen by up to 15%, and 82% of respondents expected to raise prices. Twenty-six per cent planned to cancel or pause investment projects.

This is not a one-year dip. The FDF's May 2025 survey found 41% of manufacturers planned to cancel or scale back long-term growth and productivity investment, while 54% named automation as a priority. Production costs rose 4.4% on average across 2025, and up to 5.3% for small businesses, according to the FDF. Vacancy rates in the sector are double those across UK manufacturing, which is one reason automation keeps returning to the agenda. The FDF also reports that insolvency rates in food manufacturing have grown nearly three times as fast as in manufacturing overall since 2019.

How food production came to depend on heavy equipment

Modern food manufacturing runs on certified equipment and documented processes. The Food Safety Act 1990 set the legal framework for food businesses in Great Britain, and retailer-led standards such as the British Retail Consortium's food safety standard, first issued in the late 1990s, pushed manufacturers to invest in hygienic design, traceability and inspection. Energy prices have added a second pressure since 2022. Machinery that suits a certain volume is therefore both a safety investment and a cost decision, which is why lenders see food producers as asset-heavy businesses with real working capital needs.

What food manufacturers typically fund

Processing and production lines. Mixers, ovens, fryers, filling lines and cutting equipment, often bought as a complete line from a specialist supplier.
Packaging machinery. Filling, sealing, labelling and palletising equipment, including changes needed when packaging materials or regulations change.
Cold storage and refrigeration. Chillers, blast freezers and temperature monitoring.
Automation and robotics. Pick-and-place systems, vision inspection and line controls aimed at output, consistency or reduced manual handling.
Energy-efficiency equipment. Heat recovery, efficient motors and refrigeration upgrades, where the aim is lower running costs.

Match the finance to the need

Machinery and working capital are different needs and are usually funded differently. A processing line or packaging machine has a useful life of years, so asset finance, hire purchase or leasing can spread its cost over a similar period, often with the equipment as security. Day-to-day costs such as ingredients, packaging and wages are better met from cash flow or working capital facilities, because borrowing for ten years to cover this month's raw materials stores up trouble. Many food producers also wait for payment from large retail customers, so an invoice finance or trade finance facility may support working capital where the invoices are eligible. Installation, commissioning and training costs can be significant, so ask lenders early whether they can be included.

What lenders look at

The equipment itself. Standard machines from established makers have clearer resale values than a bespoke line built around one product.
Supplier quotations and delivery. Lenders usually want a formal quote and clarity on deposits, delivery and commissioning.
Customer concentration. Dependence on one or two retailers or food-service customers can affect how a lender views repayment risk.
Certification and compliance record. Valid food safety certification and a clean inspection history support a business case.
Margins and cost resilience. Given the cost pressures above, lenders may ask how profit holds up if energy or packaging prices rise again.
Accounts and existing debt. Established trading companies with filed accounts and manageable borrowing are normally assessed more favourably.

Planning an investment when margins are tight

Start with the cost of the status quo. If an old line breaks down often, is slow or wastes product, work out what that costs each year, then compare it with the cost of replacement. Test the repayment against a poor case, such as lower volumes or higher energy bills, not only the plan you hope for. Do not rely on projected savings from a new machine as a guarantee, since supplier estimates are often drawn from ideal conditions. Phasing a project, for example replacing one line this year and another next, can keep any single commitment manageable. With Bank Rate at 4% since 5 November 2026, check whether the finance rate is fixed or can move.

What industry voices say

FDF chief executive Karen Betts has said manufacturers are running to stand still and has asked the Government to help with energy costs and to reduce the risk for smaller firms investing in new technology. In 2025, FDF director Balwinder Dhoot called it worrying that businesses were being forced to cut back on investment that would support long-term growth. These are the views of a trade body representing the sector, so read them as advocacy backed by survey data.

Risks to understand

Finance payments continue when volumes fall, a customer leaves or a product is recalled. Specialist machinery can be hard to resell, so a lender may require a larger deposit or other security. Directors may be asked for personal guarantees. Equipment can also become outdated faster than the term of the agreement, which is a point to consider when choosing between hire purchase and leasing.

Frequently asked questions

Can I finance second-hand processing equipment?

Some lenders will consider it, depending on age, condition and supplier. Terms may differ from new equipment.

Can finance cover installation costs?

It depends on the lender and the structure. Raise it at the start.

Is leasing or hire purchase better for a food production line?

There is no single answer. Hire purchase leads to ownership, while leasing can suit equipment you expect to replace. Compare total cost and end-of-term conditions.

Will my application be approved?

No lender can promise that. Every application is subject to status and to the lender's own checks.