Report points to optimism and confidence among UK SME manufacturers

Britain’s SME manufacturers are optimistic and confident about future growth, despite the uncertainty surrounding Brexit, rising production costs and skill shortages, a new report has found.

production costs
Pic: MHA Manufacturing and Engineering Report

The latest MHA Manufacturing and Engineering Report – compiled by MHA and supported by Lloyds Bank Commercial Banking in association IMechE – reveals business growth drivers as: increased customer demand (18 per cent), diversification (14 per cent) and a wider product range (13 per cent), and viewed the Eurozone a distant threat (39 per cent considered it a competitor). China was thought to be a competitor by 21 per cent.

Firms are attributing rising production costs to the increasing cost of raw materials (72 per cent), wage costs (66 per cent), volatile energy prices (47 per cent) and changes in the cost of components (43 per cent). To counter this, 52 per cent said they have included lean manufacturing/engineering principles in their future business strategies, and 28 per cent would opt for lean manufacturing processes.

When looking at productivity barriers, 27 per cent cite poor factory/plant infrastructure, 26 per cent low skills levels, 23 per cent staff shortages and 22 per cent lack of investment.

Growth barriers were identified by a few; 19 per cent said recruiting appropriately skilled staff could hold them back, 11 per cent cited working capital constraints, and 10 per cent the global economy. In order to overcome this, 41 per cent said they will invest in existing staff, offering training, benefits and production bonuses and 22 per cent will update machinery.

Of those planning to recruit, 73 per cent will look for production staff, 11 per cent design/research & development people and eight per cent sales and marketing. The biggest concern for 34 per cent of businesses is finding employees with the right skills. Of those struggling to recruit, 50 per cent cannot find skilled machinists/technicians, 27 per cent semi-skilled staff and 22 per cent graduate engineers.

Research and development was found high on the agenda, with 89 per cent of respondents investing in this area.

“This survey gives great insight into what’s happening within this sector at a ‘grass roots’ level,” said Chris Barlow, head of the Manufacturing Group at MHA. “Yes, there are concerns over the rising cost of materials, the unpredictability of the pound and a continuing crisis around the skills shortage, but businesses are demonstrating their resilience.

“Brexit uncertainty is not necessarily having the impact some would lead us to believe. What our respondents agree on is that they need greater support from the government over automation and forging better links with local schools, colleges and universities to improve the talent pool.”