By Dean Barnes Regional Director of the Manufacturing Growth Programme [1]
When it comes to bouncing back and fighting against the odds, UK manufacturing SMEs are up there with the best of them. Few management teams could have predicted how Covid-19 would not only change the business landscape for ever, but also how we keep our staff safe whilst making components.
The challenge was duly accepted and, some 20 months on, the recovery has been nothing short of sensational.
Findings from the latest Manufacturing Barometer we run in conjunction with SWMAS show that 42% of the companies questioned are now trading at increased levels compared to before the pandemic.
Two thirds are predicting future sales rises over the next six months, with 49% committing to investing and just over half looking to take on staff as they come to terms with increases in demand.
On the surface there are plenty of reasons for optimism and this continues to be the overarching sentiment.
However, there are issues that could derail the recovery if Government does not do more to support the industry.
The same survey highlighted that 96% of manufacturers are struggling with price changes within their supply chain, a stunning figure and one that encompasses several business-critical areas.
Lack of available raw materials (94%) and rising transport costs (82%) appear to be the biggest concerns for bosses, with many reporting that getting hold of some material has gone from three weeks to three months.
This is not a particular type of metal or electrical component, this appears to be widespread and encompassing every sector, causing a very difficult balancing act for suppliers keen to take on more work, but then struggling to access usual stock levels.
To address this, companies are taking steps to increase and protect their own inventories, often paying extra to get what they need. Firms are having to compete for scarce resources, which is driving the significant price increases we are seeing.
Getting the people
Recruitment is another major worry for nearly half of the manufacturers surveyed. The sudden increases in volumes has meant ramp-ups are taking place quicker than expected and labour shortages are definitely restricting productivity.
The winding down of the furlough scheme could force some companies to make decisions and either bring people back or make redundancies, driving more skills back into a rather sparse looking talent pool. This is still four weeks away and some businesses can't really afford to wait that long.
Freedom of movement has certainly impacted a lot of manufacturers and we can only see this getting worse as more EU workers decide to return home or to ply their trade elsewhere. One answer to this is to try to attract more young people into engineering and manufacturing but this is not an overnight fix, more a long-term strategy we'd like industry to embrace.
The challenges highlighted in the Barometer have been caused in part by government policies as a direct result of Brexit and the Covid-19 pandemic.
It is a vital priority that SMEs in our sector receive guidance and support to help them address these issues and ensure the recovery is not impeded. Ministers need to listen and provide real on-the-ground support for our firms.
The Manufacturing Growth Programme [2] provides funding and strategic business support to SME manufacturers.