Investment plans feel the squeeze, says CBI survey

Difficult lending conditions and the global credit squeeze are "putting the brakes" on food and drink manufacturers' investment plans, said the Confederation of British Industry (CBI).

The CBI's latest quarterly Industrial Trends Survey found that 73% of respondents from the food, drink and tobacco industry planned to spend less on buildings over the next 12 months. Only 5% said that they would spend more.

In addition, two-thirds (66%) said that they would spend less on plant and machinery, while 11% would spend more. The percentage planning to cut capital expenditure was the highest since the early 1980s, said the CBI.

"A halt in investment activity is the result of poor cash flow," said Chris Dale, branch director at risk management consultancy Aon. "Not only is the consumer spending less, but credit from banks and private equity is getting harder and more expensive to secure."

Bakery giant Greggs is the latest to cut investment from £40M to £36M.

But despite the current climate, some food manufacturers and retailers have taken on extra debt and are implementing large investment plans.

"Undoubtedly we are going to see investment reined back by businesses - but not us," said Justin King, Sainsbury's chief executive. "We made a decision a while back to take on debt and to keep on investing in the business."

Dairy Crest is another firm still spending. It is building a new facility and agreed a new five-year revolving credit facility of £85M in July. However, it is also planning to free up cash and reduce debt by cutting jobs and considering factory closures.

Bucking the trend across the world trade slows down, Nestlé boss Paul Bulcke has announced that the food giant expected to continue its sales growth for the rest of the year.