FDBusiness.com

A remarkable first quarter sales performance for UK drinks manufacturers has flown in the face of low business confidence amongst SMEs. New figures show the average small-medium UK drinks manufacturer made 64% more sales revenue in Q1 2025 than Q4 2024, and 1% more year-on-year.

The findings – based on direct data from over 600 UK firms using Unleashed’s inventory management software – show pessimism amongst the business community may be unfounded. Recent Q1 business confidence surveys show overall confidence turned negative for the first time since 2022 on the back of tax rises, inflation, weak growth and increased global uncertainty.

However the stellar sales performance in the drink industry – alongside a 113% uptick in profitability against Q4 – suggests international market turmoil has created a silver lining for UK alcoholic and non-alcoholic drinks businesses.

Joe Llewellyn, GM of ERP Small Business at The Access Group, the parent company of Unleashed, said the unusual business conditions of the first three months of the year had generally played out well for the country’s smaller producers, as had falling bank rates:

He commented: “Anecdotally, what we’re hearing from some of our customers is that Q1 brought welcome windfalls. Some tariff-affected international customers have turned to UK firms to do business, while others raced to order more before tariff pauses came off. That’s delivered a shot in the arm for some firms, but more importantly we’re hearing that steadily falling bank rates are starting to stimulate the economy, which obviously is very welcome to UK manufacturers who’ve posted a really strong start to the year.”

Unleashed’s data also showed profitability improving as manufacturers held off purchasing new stock, preferring to eat into inventory reserves where possible. Gross Margin Return on Inventory (GMROI) for the average SMB manufacturer lifted 57% YoY, to £2.68 return on every pound spent on buying stock.

Partly this was thanks to further falls in delivery lead times, down to 11 days on average. Faster delivery times allow businesses to reorder in smaller quantities, which is a more cost-efficient way to generate sales that improves margins.

It is also possible that the higher profit margins seen in Q1 were caused by purchasing managers deferring their inventory replenishment spend in response to low GBP-USD exchange rates. In January the pound dipped to 1.22 USD, making international purchases more expensive for UK buyers of US-dollar denominated goods. By the end of March, however, the exchange rate had trended favourably and reached 1.34 at the end of April.

Across all of the 12 manufacturing categories analysed, sales were up by 30% in Q1 2025 compared to Q4 2024 – and 13% year-on-year. Profitability also jumped by 10% in Q1 2025 with £4.03 generated for every pound spent on stock.

Almost all manufacturing categories saw a positive quarter-on-quarter sales performance, with only Electronics & Telecoms, and Food seeing a decline at -23% and -34% respectively.

All categories benefited from reduced lead times – Sports & Entertainment led the way with a -45% drop, from 22 days to 12. The amount of excess stock held by each company also fell in many categories, including Industrial Machinery which saw the most dramatic decrease at -68%.

View the full Unleashed Manufacturing Health Index report.

• GMROI shows how much profit inventory sales produce after covering inventory costs.

• A higher GMROI means each unit of inventory is generating a higher profit.