Region’s manufacturers still planning investment despite Brexit concerns

Half of North West SME manufacturers plan to increase their capital investment spend in the next 12-months despite the uncertainty of Brexit, according to an influential business survey.

The latest MHA Manufacturing and Engineering Report shows that only 30% cite trading tariff concerns over Britain’s pending departure from the EU as their main barrier to future growth.

Rising production costs and recruitment issues are the two biggest potential issues cited in the survey.

The report is compiled by with MHA Moore and Smalley, Lloyds Bank Commercial Banking and the Institution of Mechanical Engineers.

Respondents to the survey identified their main growth opportunities as increased customer demand (18%), diversification (14%) and a wider product range (13%).

Ginni Cooper, head of the manufacturing team at MHA Moore and Smalley, said: “This survey gives great insight into what’s happening within the sector at a ‘grass roots’ level. 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 they need greater support from the Government over automation and forging better links with local schools, colleges and universities to improve the talent pool.”

The survey found:

  • 71% of manufacturers reported revenue growth in the last year and 70% predict business growth over the next 12 months.
  • 51% have high or above average business expectations over the next 12 months (increasing to 54% over the next three years) and 50% are looking to increase their capital investment spend in the coming year.
  • 58% of respondents export products and all exporters currently do so to the Eurozone.
  • 93% believe their main competitors are based within the UK and 35% agree they’re within their own region.
  • Only 30% cite Brexit uncertainty and trading tariff concerns as their main barrier to future success and just 34% have a strategy in place for post Brexit – 66% feel they cannot plan for the impact until they know the Government’s strategy and EU response.
  • 92% believe rising production costs will impact their business next year, but in a positive move, 67% intend to absorb any price increases, rather than pass them onto customers, and 52% intend to achieve this through improved productivity and efficiency.
  • Staff recruitment is an equally big issue; 81% of respondents report problems in finding people, yet 49% expect to increase payroll numbers next year. Out of these, 63% will opt for apprentices.

When considering rising production costs, firms believe this is a result of increasing cost of raw materials (72%), wage costs (66%), volatile energy prices (47%) and changes in the cost of components (43%). To counter this, 52% say they have included lean manufacturing principles in their future business strategies.

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

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

Research and development is equally high on the agenda, with 89% of respondents investing in this area. Yet, MHA is concerned that almost half of these firms, 48%, failed to apply for R&D tax credits, saving themselves thousands of pounds.