SME manufacturers disrupted by Brexit related issues

The latest Manufacturing Barometer, produced by SWMAS (the South West Manufacturing Advisory Service) and the Manufacturing Growth Programme (MGP), found 65 per cent of companies experiencing negative price changes within their supply chain since leaving the EU, with the availability of raw materials an issue for over half (56 per cent) of firms.

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Of the 284 respondents, more than half cited complications with exporting (54 per cent) and importing goods (56 per cent) since December 31st, causing potential short and long-term hits on volumes and new opportunities.

According to the survey, less than a third of SME manufacturers feel they are getting the right support and guidance from government on how to navigate changes caused by Brexit related issues. Just over a fifth (21 per cent) of businesses believe Brexit could deliver new reshoring opportunities that would bring supply chains closer to home.

“SME manufacturers have had to deal with unprecedented levels of change over the past 12 months and it is encouraging to see some green shoots of how the sector has adapted throughout this difficult time,” said Nick Golding, managing director of SWMAS.

“However, despite signs of an initial recovery, firms have a new set of issues to contend with now the Brexit deal is done. Price hikes in the supply chain have been immediate, and we are hearing tales of lead times being extended on raw materials.

“Almost two-thirds of respondents aren’t convinced that the Brexit guidance they have already received from the government is adequate and SMEs are asking for more clarity on key issues, such as logistics or freight forwarding (54 per cent), sourcing components/services overseas (51 per cent) and product markings (50 per cent), including a CE replacement. These challenges need to be addressed and quickly.”

He continued: “Reshoring has been spoken about as a potential opportunity and there is some confidence from manufacturers that new purchasing trends might drive increased sales to the UK. We would love to see more made of this and perhaps even a co-ordinated campaign to promote the benefits of locating production back home.”

Away from Brexit related issues, the survey highlights optimism among SME manufacturers as they start the bounce back from COVID-19.

Results show that 31 per cent of companies have seen sales increase over the past six months, with 44 per cent expecting further growth between now and August, both up 3 per cent and 4 per cent respectively on the previous report.

“Nearly a third of firms are planning to take on staff going forward, whilst 39 per cent are planning to spend more on new machinery and capacity as they look to replace sales volumes lost in previous months,” said Martin Coats, managing director of MGP.

“Many were unable to continue production during the first lockdown and, therefore, put contingency plans in place to help them operate safely going forward.

“Encouragingly, this report indicates that some companies feel these actions could be sufficient to help them survive and thrive over the coming months. It is reassuring to see that confidence appears to be slowly improving despite ongoing challenges, with the number of businesses expecting growth in future sales gradually returning to pre-pandemic levels, albeit on substantially lower expectations.”

The Manufacturing Barometer covered Q3 trading activity in 2020 with responses taking place in January 2021.