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State of the Nation

Times Are Mixed For UK Manufacturers – But They Still Want To Grow

By March 26, 2015 No Comments
Times Are Mixed For UK Manufacturers – But They Still Want To Grow

ManufacturingWhat is the current state of Britain’s manufacturing? Those reading recent headlines on the topic could be forgiven for feeling confused. One set of statistics says manufacturing’s in decline, while other figures say small and medium manufacturing firms are optimistic, looking to invest in new equipment, and most expect sales turnover to grow. Other evidence suggests more companies are looking to reshore their manufacturing operations back to the British Isles.

  • The bad news is manufacturing output in the UK was down 0.5 per cent in January on the month before, according to the most up-to-date figures from the Office of National Statistics, with experts warning of further challenges ahead.
  • But the good news is 54 per cent of SME manufacturers expect to invest in new technology in the next six months, seven out of ten predict their sales turnover will increase during the same period, and 70 per cent also said the current cashflow profile of their operation didn’t hinder growth, the latest Manufacturing Barometer

Cheap oil versus a strong pound

The truth is that it’s a mixed picture for UK manufacturing at present. On the one hand, the sector has experienced overall growth of two per cent over the 12 months to January. The falling oil price has been a particular boost for many energy-intensive companies producing goods, the Confederation of British Industry pointed out in its recent survey of industrial trends. But other business groups, including the British Chambers of Commerce, have warned the growing strength of the pound against the ailing euro could seriously hit British manufacturers’ ability to continue to export to the Eurozone. Don’t forget that Europe is the largest export market for UK businesses, after all.

Strong support for manufacturers

However, there is a lot of backing available for UK manufacturing. In December, the Government launched the Business Growth Service, specifically offering advice and support to SME manufacturers with fewer than 250 employees and a turnover below £40 million. Firms can use the service to tap into a wide range of expertise from well-known bodies and initiatives, including the GrowthAccelerator scheme, the Manufacturing Advisory Service (MAS), the Intellectual Property Office, the Design Council, UK Trade & Investment, Innovate UK, and local Growth Hubs.

Manufacturing companies are beginning to sign up to attend events run by this wealth of expert bodies, teaching business growth skills, running digital bootcamps to boost sales and exports, and holding workshops on improving efficiency, developing new ideas, and gaining access to finance. It’s also possible to be assigned a personal account manager who will line up tailor-made advice for firms. MAS, the Government agency supporting manufacturers, also offers businesses in the sector free reviews, and subsidised consultancy services.

There was the announcement in last week’s Budget that enterprise zones will be extended into Manchester and Mersey Waters, specifically focusing on manufacturing businesses. Plus, the Government proposes bringing forward to the 2015 to 2016 financial year compensation for small-scale feed-in tariffs for energy-intensive industries. It seems politicians recognise manufacturers still need a lot of help to be able to thrive.

Manufacturing is coming home

The 80s and 90s saw a trend towards moving manufacturing overseas, but more UK manufacturing firms are beginning to shift their production back onto native soil.

  • About 11 per cent of manufacturing businesses brought operations home in the 12 months to December, according to MAS.
  • Of these, almost seven out of ten companies reported an increase in sales as a result.
  • Better-skilled workers, a desire to exploit ‘Brand Britain’, and a need to reduce time to market are all reasons given for many business owners to reconsider opportunities to manufacture goods within the UK.

This renewed tendency to move manufacturing back to Britain has the potential to add £15.3 billion to the UK economy, and create more than 315,000 jobs, accountant EY estimates. And it seems that more manufacturers want both to operate out of UK premises, and grow their business even further.

Barriers to growth

Many manufacturing companies do say they want to grow, but the same, familiar hurdles stand in their way.

  • A third of SME manufacturers said their growth had been hindered by poor availability of business finance or investment, the latest Manufacturing Barometer found.
  • One in five said their plans were being held back by an inability to bring new products to market in time and within budget.

Manufacturing businesses are among the many sectors with which we at Boost Capital work, and we hear from our clients in the sector just how hard it can be to gain access to business finance via conventional routes.

Manufacturing businesses are among the many sectors with which we at Boost Capital work, and we hear from our clients just how hard it can be for manufacturing firms to access business finance via conventional routes. When new equipment is needed, or a manufacturing plant needs to be extended or renovated, getting funds quickly is of primary importance. More firms are learning how alternative finance can help them grow, but still too many have yet to realise funding options do exist away from the high street banks.

We hope that the message continues to get out that lenders like us are open for business, so that we can join in the success of Britain’s resilient, enterprising, and hugely ambitious manufacturing industry. With the right financial backing, plus proper advice and support, its future really could be great. It looks to us that there are more reasons for optimism in this area than doubt. So, here’s to UK manufacturers’ hard work, determination, and continued growth. Times are good for manufacturing – and can get better still.

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