Sector buoyant but cautious about future growth

MHA MacIntyre Hudson

1st March 2019

Money Matters

MHA MacIntyre Hudson

MHA MacIntyre Hudson and Lloyds Bank Plc have launched the latest Manufacturing Survey Report for 2019. The survey details that overall UK small and medium-sized enterprises (SME) manufacturers remain optimistic and confident about future growth, despite Brexit uncertainty, rising production costs and skill shortages, with 71 per cent of respondents having achieved revenue growth during this last year compared with 65 per cent the year before.

The view from the Midlands businesses that responded to the survey is less optimistic than the national picture, with 62 per cent of respondents forecasting growth, a decrease of 17 per cent on the previous year. This expected growth is forecast to between one and five per cent and driven by diversification. During the last 12 months, 66 per cent of businesses reported growth which compares well to the 73 per cent who forecast growth in last year's survey. The majority of businesses do not have a strategy for Brexit in place. Of the 34 per cent that do, 28 per cent claim that Brexit will have a limited impact and six per cent claim that it will make an extensive impact to their business. It is interesting to see the link between this and the high percentage of businesses predicting growth. In addition, 22 per cent of businesses have lost staff as a result of the referendum result due to uncertainty relating to EU workers' rights, adding a challenge to the delivery of this growth against the prevailing challenge of recruiting the right staff.

Richard Powell, Manufacturing and Engineering sector specialist and Partner at accountants and business advisors, MHA MacIntyre Hudson, said: "The sector continues to grow and maintain a positive attitude despite current uncertainties and challenges and has once again demonstrated how resilient it is by outperforming most forecasts this last year. It is a key sector for this country and therefore we must do our utmost to ensure it thrives in future years. Part of doing this must be to work together as an industry to encourage the next generation to work in the M&E sector. It is an innovative industry so therefore we should be innovative in our thinking to achieve this!"

Interestingly only 34 per cent of respondents have a Brexit Strategy in place, with 66 per cent feeling that they cannot plan for the impact until they know the government's strategy and the EU's response.

Other key points nationally from the survey include:

* 51 per cent have high or above average business expectations over the next 12 months (increasing to 54 per cent over the next three years) and 50 per cent are looking to increase their capital investment spend in the coming year.

* 58 per cent of respondents export products and all exporters currently do so to the Eurozone.

* 93 per cent believe their main competitors are based within the UK and 35 per cent agree they're within their own region.

* 92 per cent believe rising production costs will impact their business next year, but in a positive move, 67 per cent intend to absorb any price increases, rather than pass them on to customers, and 52 per cent intend to achieve this through improved productivity and efficiency.

The manufacturing and engineering survey - compiled by MHA, the UK-wide group of accountancy and business firms and supported by Lloyds Bank Commercial Banking in association with the Institution of Mechanical Engineers - reveals a buoyant sector that's not letting political and economic uncertainty drag it down.

For more information on this subject or to obtain a copy of the Manufacturing Survey Report, contact Richard Powell on 01604 624011 or email richard.powell@mhllp.co.uk

MHA MacIntyre Hudson