The Manufacturing Barometer, run by SWMAS (South West Manufacturing Advisory Service) and supported by the Manufacturing Growth Programme (MGP), has found 96 per cent of its 260 respondents struggling with price changes within their supply chain.
Firms believe that rising costs are being driven by lack of raw materials availability (94 per cent), rising transport costs (82 per cent), and reduced capacity in the market to meet demand (63 per cent). Just under half (49 per cent) said they are struggling to find staff as they attempt to scale back up following the pandemic.
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In a statement, Nick Golding, managing director of SWMAS, said: “The last quarter showed a considerable jump in confidence, from 44 per cent of respondents to 65 per cent expecting sales to grow in the next six months based on increasing demand.
“With 65 per cent highlighting potential future sales growth again this quarter, confidence appears to be levelling off. In addition, those expecting future profits to rise has dropped from 52 per cent last quarter to 46 per cent.
“It appears we are seeing the first signs of supply chain struggles starting to hinder the upturn. Freedom of movement is adding to recruitment pain, whilst problems securing raw materials seems to be partly due to logistics challenges of importing goods.”
He continued: “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. The challenges highlighted 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.”
This quarter’s report also found 42 per cent of firms trading at increased levels compared to their pre-COVID-19 position, and this is mirrored with predictions of job creation (51 per cent) and increased future investment (49 per cent).
“We have all been encouraged by the pace of our recovery,” said MGP’s managing director Martin Coats. “However, it is not without substantial challenges in the supply chain, most noticeably in the ability to get the staff and materials needed to produce parts. The latter is the biggest concern, which isn’t surprising when we’re hearing accounts of some lead times increasing from three-weeks to 12 months."
Coats added: "Recruitment continues to be a significant worry which may ease once furlough decisions are taken, but there’s still a two-month wait for this to happen and we’re not sure manufacturers can wait that long.”
The team behind the Manufacturing Barometer will now approach government with measures that can be taken immediately to ease some of these challenges.
The Manufacturing Barometer covered trading activity in April, May, and June 2021, with responses collected in July.
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