UK manufacturers’ Brexit fears put brakes on investment and recruitment

With Brexit looming, the number of UK SME manufacturers expecting to see growth in their business has hit its lowest point in nearly a decade.

That’s according to the latest UK SME Manufacturing Barometer, which is said to reveal a sector braced for uncertainty.

51% of UK SME manufacturers surveyed expect their sales turnover to increase in the next six months.

While this is more than half of those surveyed, it is said to be 13% fewer than the last quarter and, worryingly, continues a downward trend seen over the last year, resting now at a level not seen for six years.

In addition, almost a fifth of manufacturers say they expect a reduction in sales in the run up to March 2019. This is coupled with the fact that over a quarter (28%) have already reported a reduction in sales in the last six months.

The quarterly SME Manufacturing Barometer is the said to be the UK’s largest and widest-ranging survey of the SME manufacturing sector, conducted by SWMAS (part of the Exelin Group) in partnership with Economic Growth Solutions.

More than 400 senior decision-makers offered their views on a range of subjects and issues including sales figures, profits, investments, staffing levels and readiness for Brexit.

When asked about the profit outlook for their companies, just 39% said they anticipated an increase in the next six months, with just under a quarter (24%) forecasting a reduction.

This drop in manufacturers’ confidence is also evidenced by just 37% set to increase the investment in their businesses, dropping from last quarter’s 52%, with just 34% aiming to recruit more staff – a fall of 12%.

Simon Howes, managing director of SWMAS, said: “What we are clearly witnessing is manufacturers putting the brakes on new investments and recruitment, whilst some enter survival mode caused by ongoing Brexit uncertainties.

“However, we are also seeing signs that suggests our SME manufacturers are looking at their own ways to change and adapt to meet the Brexit challenge, such as intentions to start exporting or to export more, development of new products and improvements in efficiency and productivity.”

Dean Barnes, regional director of Economic Growth Solutions, said: “Brexit, and the continuing lack of clarity it brings, is certainly a significant factor in the concern manufacturers have for the future of their businesses.

“Our research has found that over half of UK SME manufacturers predict that Brexit is detrimental to their business in the short-term or threatens their survival, compared to the 36% who say they are optimistic about the new opportunities ahead.”

With more planning for the threats and risks rather than the opportunities, and with 15% reporting they have no plan at all about how to manage the impact of Brexit, fears grow that the UK manufacturing sector could suffer serious harm.

Simon Howes continued: “We are also seeing the first signs that manufacturers are now stockpiling their raw materials and, to a lesser extent, finished goods.

“Concern about supply chains is also expressed through intentions to strengthen relationships and to work more closely with existing suppliers or to develop new, non-EU or UK-based supply chains.

“Driven by a lack of information about what Brexit actually means, there is a strong sense of manufacturing businesses simply not knowing what to do.

“That said, there are also encouraging signs that these companies are adopting a pragmatic approach wherever they can and making plans around what is in their control, namely: export, investment in existing staff, improved efficiency and strengthening relationships with customers and suppliers.

“Previous manufacturing barometers have shown there is a shortage of qualified and talented staff in the sector and there is clearly a need to incentivise investment in both capital equipment and people. “

In a quarter that reveals the joint lowest ebb of confidence since the SME Manufacturing Barometer was created ten years ago, there are opportunities to help these businesses to survive and maximise profitability through challenging times.