Sector review: Manufacturing

Manufacturing review

 

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

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, GMI on Close Brothers’ behalf.

Where relevant, comparisons are made with national sentiment.

The commentary in this review focuses on: 

  • Economic outlook 
  • Funding requirements 
  • Concerns & priorities 
  • Clean Air Zones 
  • Gender pay gap
  • Minimum pay rise
  • Emergency waste removal 
  • Business rates

Economic outlook

Manufacturing review - economic growth

Manufacturing SME business owners are becoming more optimistic about the current economic outlook, with 31% expecting the economy to continue to grow, with a further 40% of the opinion that the worst is behind us. Only 15% (previous 25%) are worried that the UK could slip into decline again, which is less than the UK national average of 19%, while 12% feel that a true recovery is yet to happen and 3% feeling the economy is worsening.

Looking ahead, 39% of Manufacturing firms have expansion plans for the coming 12 months, ahead of the UK average of 35%. Over half (55%) expect performance to remain static, while only 7% envisage contraction and none will be putting up the ‘closed down’ signs.

 

Funding requirements

Manufacturing review - access to funding

Despite being optimistic about the future, 71% of Manufacturing SMEs are finding that accessing the funding they need is either a ‘major’ or ‘moderate’ challenge. Just 14% felt it’s becoming easier with only 15% saying they’ve ‘never had a problem accessing finance’.

Even with the challenging funding environment, three in every five firms will be looking to invest in their over the coming 12 months, with most of them looking at conventional bank loans to meet their requirements, followed by invoice finance and overdrafts.

Q: What type of funding do you usually use for your business?

 

 

UK

Manufacturing

Bank loan

33%

31%

Invoice finance

14%

19%

Overdraft

16%

16%

Personal/family funding

15%

11%

Asset finance

8%

10%

Asset based lending

4%

7%

Credit cards

8%

5%

Crowd funding/peer to peer lending

2%

2%

Concerns & priorities

The biggest concern for businesses across the UK, including Manufacturing, is maintaining their cashflow, with late payments some way back and lack of skilled staff in third place.

Q.4b What is your main business concern?

 

UK

Manufacturing

Cash flow

25%

27%

Late payments

15%

18%

Lack of skilled staff

13%

14%

Finding extra working capital

10%

13%

Competitors

13%

8%

Tax / VAT

6%

6%

Bank charges

4%

6%

Managing expansion

9%

6%

Access to good financial advice

4%

3%

 

Achieving growth is the Manufacturing sector’s main priority, well ahead of all other options, including business consolidation, development of products and services, and paying down debts.

Clean air zones (CAZ)

Knowledge among Manufacturing firms about what CAZs are is higher than the UK average (60% v 53%) as is understanding about why they’re being proposed (50% vs 47%)

At 76%, support for CAZs in the Manufacturing sector is good, and higher than all other industries polled and consequently the general UK sentiment.

Six in every 10 Manufacturing firm owners indicated their willingness to pay to enter a clean air zone if the vehicle fails to meet the required environmental standards, which matches the overall UK figure of 60%.

Gender pay gap

Manufacturing review - equal pay

More than a quarter (28%) of businesses admit to there being a gender pay gap at their place of work with a further 9% being ‘unsure’; the remaining 63% were confident that there was not.

When asked about having a policy of equal pay for the same job, regardless of gender, 77% confirmed that they did have one in place with 19% saying ‘no’; the rest were unsure.

The reasons provided for why the gender pay gap exists at their organisation centred on ‘culture’ and ‘proportionality’.

Q: What are the reasons the gender pay gap exists?

 

UK

Manufacturing

Historical reasons, including culture of paying women less

37%

26%

Proportionally, men hold more senior positions in business

37%

48%

Women are more likely to be employed in lower paid roles, for example administration

16%

16%

Women are not attracted to my sector so there are proportionally more men

10%

10%

Minimum pay rise

Manufacturing review - pay rise

At 88%, Manufacturing businesses felt well prepared for the minimum pay rise that came into force in April 2018. The remaining 12% either felt unprepared or weren’t sure either way.

While support for the minimum pay rise is strong, at 84%, over half of business owners feel let down by the government, saying they have not received enough support for this latest rise.

A significant minority (17%) are simply unable to afford the increased rate while a further 5% were still unsure of its impact. Unsurprisingly, even many of those who can afford the increase said it would impact their profitability.

Q: Will your profits be affected by the minimum pay rise?

 

UK

Manufacturing

Yes

50%

50%

No

36%

35%

Don’t know

14%

15%

Emergency waste removal

A quarter of Manufacturing firms surveyed require emergency waste to be removed, while 28% admitted to running out of space to store waste.

An additional 21% feel that waste removal services aren’t regular enough with a large minority (22%) of firms having lost business because of waste removal problems.

Business rates

Three in every five Manufacturing SMEs are happy with the business rates they pay; however, a large number – 35% - feel they pay too much, which is marginally ahead of the national figure of 32%.

Over the past two years, over two thirds (68%) have seen their business rates rise, either sharply or steadily; for 27% of respondents they’ve remained static.

Views on the value for money SMEs get from their rates is quite split, with 50% saying ‘yes’ and 45% having the opposite view; the remainder don’t pay business rates.

Where they do agree is on the subject of the need to make business rates simpler and more flexible (78%). Half of firms surveyed also feel the government needs to do more to assist firms with business rate relief.

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