Almost a third of SME manufacturers are moving supplier base from to EU to the UK, finds research

The UK SME Manufacturing Barometer, the latest quarterly insight into the SME manufacturing sector from SWMAS and partner Economic Growth Solutions, has shown how the challenging economic and industrial climate is pushing UK manufacturers to carry significant risks as they move their supplier base out of the EU and invest precious cash in stockpiling raw materials.

Whilst actual and forecast performance both show a slight recovery from the previous quarter, the number of SME manufacturers reporting an increase in turnover, profits, staffing and investment in new machinery and premises are all down compared to the same period in 2017.

Projections for the next six months are also at a much lower level than this time a year ago, and although some manufacturers indicate a desire to invest in their businesses, many continue to hold off, waiting for clarity on the future.

In terms of actual performance, 51 per cent of businesses surveyed said turnover had risen in the last six months, with 10 per cent being down on the previous year.

Investment in new machinery and premises is crucial for any manufacturing business in order to stay competitive, but this saw a steep decline with just 37 per cent increasing spending in this area, compared to the previous years’ 46 per cent.

The Manufacturing Barometer also asked manufacturers to look ahead to the next six months.

55 per cent expect sales turnover to increase during the first half of 2019, down a full 17 per cent on the previous year, and 45 per cent expect an increase in profits, down 14 per cent year on year.

Simon Howes, CEO of Exelin Group, said: “Previous Manufacturing Barometers have demonstrated the characteristic determination and pragmatic approach shown by UK SME manufacturers in uncertain times, yet we must acknowledge that performance is down compared to this time next year and this is being driven by a lack of clarity on the future.”

“As we head into the final week before the scheduled Brexit date UK SME manufacturers are doing what they can to adapt their businesses. Our research highlights that over half are holding back on investment and recruitments and struggling to increase sales and profits.”

"Brexit is clearly amplifying the pressures manufacturers have to manage and whilst SMEs can be more agile they also have fewer resources to navigate and manage change.”

“The latest Barometer shows the challenges of securing the supplier base and cost of addressing stock levels are diverting these limited resources from the sector. The UK’s SME manufacturers need support at this vital time to ensure any business casualties are minimised and that they have the resources to grasp any emerging opportunities.”

Dean Barnes, Regional Director of Economic Growth Solutions, said: “Compared to last quarter’s forward projection we have seen a partial recovery in the number of manufacturers anticipating sales, profits, capital investment and recruitment increase in the next six months. However, it is still a reduction across the board when compared to the same period last year.”

“Stockpiling creates its own issues, for example if the business can’t finance this activity or because suppliers stock levels are running low. While stockpiling is a popular strategy to try and head off Brexit uncertainty, it could be high-risk as it ties up a company’s cash reserves which are needed for running costs and to pay employees.”