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Manufacturing and Engineering Industry Update

Welcome to the Close Brothers Asset Finance update of the Manufacturing and Engineering industry. In this document we highlight a wide range of issues relevant to SMEs in this industry.

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The results are based on the Close Brothers Business Barometer, a quarterly survey of close to 1,000 SMEs across the UK conducted by specialist independent researcher, Lightspeed, on Close Brothers’ behalf.

Where relevant, comparisons are made with national sentiment.

Economic outlook

Manufacturing and engineering SME business owners’ views about the economic outlook continue to trend higher than the rest of the UK, with 43% confident the economy will grow (UK: 36%) and a further 24% feeling that while it will take longer, better times are ahead (UK: 27%).

A significant minority (28%) are concerned that the economy could decline and haven’t experienced any true economic growth.

Looking ahead, over half (53%) of manufacturing and engineering firms expect their performance to remain static, while 39% are hoping to expand their operations in 2019, which is more optimistic than the UK average of 36%. Only 8% predict their business will contract.

Finance requirements

Accountants (31%) are firmly entrenched as manufacturing and engineering firms’ first port of call for financial support and advice, some way ahead of bank managers (23%) and financial advisors (22%).

A large - and increasing - number of firms (39%) polled are finding it a ‘major challenge’ to access the funding they need and more difficult than it was a year ago. A further 34% are saying that it hasn’t become any easier to get hold of finance and is as problematic as it’s ever been.

A combined 26% say it’s either become easier or they’ve ‘never had a problem accessing finance’.

Despite the challenges obtaining finance, a high number (74%) of business owners said that they would be seeking funding for business investment in the coming 12 months.

Concerns and priorities

Maintaining cash flow is the biggest concern for 33% of businesses in the manufacturing and engineering industries, followed by ‘late payments’ (13%) and ‘finding extra working capital’ (13%), which broadly reflects the national sentiment.

At 39%, ‘achieving growth’ is by some distance the manufacturing and engineering industry’s main priority, followed by ‘paying down debts’ (23%) and ‘business consolidation’ (18%).

Mental health

While the impact of mental health continues to be felt across the SME community, with over half (51%) of manufacturing and engineering firms in the UK reporting that at least one of their employees has taken time off work because of it, attitudes are changing for the better. Only 6% of SMEs in the manufacturing and engineering industry are of the view that feelings towards those suffering from mental health are becoming worse, against 53% who say it’s changing for the better.

In addition, 50% of SMEs have noted an increase in reporting of mental health issues over the last three years.

Two thirds of firms polled have taken steps to actively raise awareness of mental health among employees, while 57% have implemented a mental health policy against a quarter who don’t have one in place.

Charity support

Manufacturing and engineering firms are convinced that charity support and fund raising is important to employee morale with 73% feeling it creates a bond in the team and gives their workers something positive to focus on.

In total, over six in 10 (62%) of manufacturing and engineering firms actively support a charity, which compares favourably to the UK average of 53%. One of the reasons for not supporting a charity is that some businesses don’t feel that they’re ‘big enough’.

A further 74% feel that supporting a charity says something positive about a company's culture; however, over half think people are suffering from ‘donation fatigue’.

Ageing workforce

Despite manufacturing and engineering SMEs overwhelmingly understanding the benefits of employing older workers - with their experience being particularly valued along with their ability to mentor more junior members of the workforce – over two thirds feel that the recruitment process discriminates against older workers.

While exactly half of manufacturing and engineering firms are comfortable with being able to recruit the talent they need in the coming five years, 39% are predicting problems in the future and a further 11% say they’re already struggling.