MARCH 2020 OPINION
A bright future
Growth and resilience are finding themselves on SMEs’ agendas,
according to a major new report by accountancy association, MHA
BY CHRIS BARLOW, HEAD OF MANUFACTURING, MHA
The latest MHA Manufacturing
and Engineering Report (https://
bit.ly/2Teni6O) concludes
that although the average
manufacturing business is working harder
for marginally less returns, SMEs remain
buoyant and are building resilience by
strengthening their balance sheets, reducing
borrowing and re-evaluating supply chains.
Having analysed feedback over the past
four years (scrutinising it from a qualitative
and quantitative perspective), we’ve found
revenue continues to increase, year on year.
For 2018/2019, it was 4.11%, a slower rate
than the previous year. The food, drink and
tobacco sector leads the way in terms of
revenue growth, (13.14%) whereas the motor
and transport manufacturing sector has seen
a minus 10.39% decline in revenue.
Not surprisingly, SMEs have been
building resilience by increasing their net
assets. Within the sampled population of
1000+ UK manufacturing and engineering
firms and over 230 client responses, we find
net assets have grown to £10.49bn, up from
£9.97bn the previous year. Companies have
also been reducing their borrowing; our
report shows a reduction of 58%, indicating a
general strengthening of the balance sheet.
Brexit fears have had an impact when
it comes to supply chains, with 82% of
respondents evaluating their supply chains.
This is something we’ve been encouraging
our clients to do, particularly as, if they
have Authorised Economic Operator status,
they’ll reduce potential delays at Customs.
Despite future trading uncertainty,
our respondents remain confident of
growth; 34% project growth between 1%
and 5%, and 48% plan to make significant
capital investment. However many are in a
quandary. An enduring feature of our reports
over the years has been the skills issue,
and this year was no exception with 78%
reporting difficulties in recruiting.
According to Report contributors,
My LMI (providers of Labour Market
Information), 2019 saw an 18% increase
overall in engineering and manufacturing
recruitment to 1.1 million positions
advertised. It also registered an acute
shortage across the country of CNC
programmers and welders, plus people to
fill the more niche, fast-growing roles such
as hardware or electronic design engineers.
Add to this concerns over Brexit – not
just the movement of goods, but workers
too – and it becomes clear why 39% felt
they could not plan until they know more
about the likely outcome of negotiations.
It’s heartening however, to find 61% have
a Brexit strategy in place.
The continuing skills gap may prompt
manufacturers to think differently about
how they address this issue, and the answer
could lie with Industry 4.0.
However, only 29% of respondents have
a strategy in place for Industry 4.0, with a
number citing a lack of infrastructure or
finance as a reason why this wasn’t practical.
It may be that with Brexit, there were more
pressing needs within the business, but as
time progresses and more clarity emerges,
this could be the time to consider Industry
4.0 as a solution to the skills gap issue. It
doesn’t necessarily mean fewer jobs; just
different ones.
In addition, funding for RPA could
come from a research and development
tax claim which can be reinvested back into
the business to support future innovation.
Growing environmental concerns
are prompting businesses to implement
measures to reduce their environmental
impact and I’m delighted to see 62% have
something in place; reducing waste and
increasing efficiency makes good financial
sense. The government is currently looking
at various policy options to create a greater
overall awareness of energy efficiency,
including green loans, energy efficiency
auctions and obligations, which are poorly
known amongst SMEs.
Overall, the future looks bright for
firms in the manufacturing sector. They’re
optimistic about their post-Brexit futures
and are demonstrating prudence and a
resilience that will equip them to face future
challenges. They know they need to evolve to
address environmental issues and the same
applies when tackling the skills gap.
Are you a manager of an SME manufacturer? How confident are you about the future?
We want to hear from you. Email: chris.beck@markallengroup.com
www.manufacturingmanagement.co.uk 11
metamorworks /stock.adobe.com
Firms are optimistic
about their post-
Brexit futures and
are demonstrating resilience”
/www.manufacturingmanagement.co.uk
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