The Scottish food and drink sector is set to receive a crucial boost with a near £6 million capital investment from the Scottish Government. This funding, distributed among 28 businesses across the nation, aims to enhance productivity, drive innovation, and stimulate job creation, reinforcing a vital cornerstone of Scotland’s economy amidst persistent economic challenges.
Administered by industry body Scotland Food & Drink, the Food and Drink Processing Scheme Scotland (FDPSS) is a competitive grant programme offering up to £400,000 per project. The grants can cover a maximum of 40% of eligible costs and form a key part of a broader £9 million Scottish Government investment package. The scheme is designed to bolster processing capabilities, increase capacity, improve efficiency, and contribute to the sector’s net-zero and sustainability goals. It also seeks to strengthen supply chains and foster innovation. Eligible projects encompass critical infrastructure upgrades, including new building construction or refurbishment, advanced cold storage facilities, and modern machinery.
The latest funding round supports a diverse range of Scottish food and drink enterprises, spanning various geographical locations and specialities. Beneficiaries include a Highland egg producer, a potato processor in the Borders, a whisky malting facility in the Western Isles, and a Fife-based cheese company. These projects will enable vital modernisations, such as the installation of new automated packing lines and equipment to boost operational capacity and efficiency.
Ministerial Support and Industry Impact
Economy Secretary Stephen Flynn, who assumed his role in May 2026, visited Simon Howie Foods in Dunning, Perthshire, to highlight the investment’s impact. The prominent Scottish butcher was awarded over £295,000 from the scheme, which will facilitate the adoption of automated slicing, tray filling, and labelling technology. Mr Flynn, whose extensive portfolio includes economic strategy and food and drink policy, underscored the sector’s importance, stating: “Our food and drink sector is a vital part of Scotland’s economy, and this funding will help businesses right across the country invest in the future. These grants will support innovation, boost productivity and help create sustainable jobs in communities from North Uist and Moray to Dumfries and Galloway and the Borders.”
Simon Howie Foods, a family-owned business established in 1986, is a significant player in Scotland’s food manufacturing landscape, supplying major supermarkets across the UK. The company reported robust financial performance, with pre-tax profits reaching £6.9 million for the period ending January 2025, on revenues that climbed 27% to £37.4 million. This growth was partly fuelled by increased sales in England. Demonstrating a proactive approach to operational costs and environmental responsibility, Simon Howie Foods has also invested heavily in renewable energy solutions. The company’s £3 million renewable energy system, comprising a wind turbine and solar panels at its Dunning site, became operational in September 2024. This system is projected to generate over 120% of the business’s energy requirements and reduce carbon emissions by over 500 tonnes annually. Scottish Enterprise supported this initiative with a £500,000 grant for the solar panels.
Simon Howie, of Simon Howie Foods, welcomed the government’s support, stating: “We’re delighted to receive this funding, which will allow us to invest in new machinery and increase our production capacity. Continued investment is essential to help us meet growing demand, improve efficiency and remain competitive in a challenging food manufacturing environment. As a family-owned Scottish food business, this investment will help us continue to grow and produce great food here in Perthshire for customers across Scotland and beyond.”
Sector Performance and Headwinds
The Scottish food and drink sector remains a cornerstone of the nation’s economy, encompassing agriculture, fishing, aquaculture, and manufacturing. In 2023, the broader sector generated a record annual turnover of £19 billion and contributed a record £7 billion in Gross Value Added (GVA) to the economy, employing approximately 123,000 people across its around 17,000 businesses. The manufacturing component alone demonstrated significant strength, growing by 20.2% in 2025 and contributing £5.7 billion, solidifying its position as Scotland’s largest manufacturing sector.
Despite its inherent resilience, the sector faces considerable headwinds. These include persistent rising operational and energy costs, ongoing inflationary pressures, and complex supply chain disruptions, some exacerbated by geopolitical events such as the closure of the Strait of Hormuz, which has driven up energy and supply chain costs. Food inflation was expected to reach at least 9% by the end of 2026, increasing household grocery bills.
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A significant talent shortage continues to be a concern, with estimates suggesting a need for nearly 35,000 new recruits by 2031 to address skills gaps, particularly in areas like engineering and automation. A 2024 survey indicated that 31.2% of Scottish businesses struggled to fill roles, with 63.1% citing an insufficient number of qualified candidates. The workforce is also ageing, with one-third of the food system workforce now over 50.
Furthermore, exports of Scotch whisky, a flagship product, saw a decline in 2025, falling by 0.6% in value to £5.36 billion and 4.3% in volume globally. Exports to the United States, the industry’s most valuable market, were particularly affected, dropping 4% in value to £933 million and 9.2% in volume due to a 10% tariff introduced by the US in April 2025. This tariff led to an even sharper 7% drop in value and 15% fall in volume for US exports between May and December 2025. Single malt exports experienced a 6% decline in value. Concerns remain that further tariffs could be imposed, with a potential rise to 35% in July 2026, following the end of a five-year suspension of a previous 25% tariff.
Initiatives like the FDPSS are therefore critical in enabling businesses to innovate, improve sustainability, and maintain competitiveness in a challenging global market. This aligns with the Scottish Government’s broader strategies, including the Rural Support Plan 2026–2031, which focuses on sustainable food production, action for climate and nature, and supporting rural communities. It also supports the ambition for Scotland to be a leading low-carbon and efficient food producer.
