Mergers and acquisitions in the food sector are predicted to increase over the next year, while local and fairly traded produce are expected to present significant opportunities for businesses.

Analysts at business adviser Grant Thornton quizzed 50 senior executives at major food and drink companies, with 69 per cent of them saying they thought M&A activity would rise as the sector had recovered early from the recession.

Trefor Griffith, corporate finance director at Grant Thornton, said: “Food and beverage producers had to digest sharp increases in input prices in 2007 and 2008, leaving the survivors in good shape to bear the recession. Most producers are targeting growth already, while 43 per cent of our respondents are still cutting costs.”

New product launches are also high on the agenda in the sector and two-thirds of those surveyed by Grant Thornton said they are considering new products to hit the market over the coming year.

“It is remarkable that not a single respondent to the food sector survey highlighted competition from foreign firms as a significant challenge and less than half of them said the weakness of sterling was bad for business,” said Griffith, citing 22 per cent of those surveyed being more concerned with domestic competition as their biggest challenge, while a third were worried about reduced consumer spending.

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