Brexit challenges threaten to slow SME manufacturing comeback

Posted on 15 Feb 2021 by Tom Lane

Brexit issues are causing England’s small to medium-sized (SME) manufacturers significant disruption as they look to recover from the economic effects of COVID-19.

The latest Manufacturing Barometer, which is produced by SWMAS (the South West Manufacturing Advisory Service) and the Manufacturing Growth Programme (MGP), reveals almost two thirds (65%) of companies have seen negative price changes within their supply chain since Brexit, with the availability of raw materials an issue for 56% of firms.

Of the 284 national respondents, more than half cited complications with exporting (54%) and importing goods (56%) since December 31st, causing potential short and long-term hits on volumes and new opportunities.

This survey, the largest of its kind in the UK, also highlighted that less than a third of SME manufacturers feel they are getting the right support and guidance from Government on how to navigate changes caused by Brexit, underlining the need for better communication and additional tailored support.

On a more positive note, 21% of businesses believe Brexit could deliver new reshoring opportunities as firms look to bring their supply chains closer to home.

Nick Golding - Brexit
Nick Golding, Managing Director of SWMAS (South West Manufacturing Advisory Service)

“SME manufacturers have had to deal with unprecedented levels of change over the past 12 months and it is encouraging to see some green shoots of how the sector has adapted throughout this difficult time,” explained Nick Golding, Managing Director of SWMAS.

“However, despite signs of an initial recovery, firms have a new set of issues to contend with now the Brexit deal is done. Price hikes in the supply chain have been immediate, and we are hearing tales of lead times being extended on raw materials.

“Almost two thirds of respondents aren’t convinced that the Brexit guidance they have already received from the government is adequate and SMEs are asking for more clarity on key issues, such as logistics or freight forwarding (54%), sourcing components/services overseas (51%) and product markings (50%), including a CE replacement. These challenges need to be addressed and quickly.”

He continued: “Reshoring has been spoken about as a potential opportunity and there is some confidence from manufacturers that new purchasing trends might drive increased sales to the UK. We would love to see more made of this and perhaps even a co-ordinated campaign to promote the benefits of locating production back home.”

Optimistic Picture

Away from Brexit struggles, the latest Manufacturing Barometer paints a more optimistic picture of industry slowly starting to bounce back from COVID-19.

Results show that 31% of companies have seen sales increase over the past six months, with 44% expecting further growth between now and August, both up 3% and 4% respectively on the previous report.

“Nearly a third of firms are planning to take on staff going forward, whilst 39% are planning to spend more on new machinery and capacity as they look to replace sales volumes lost in previous months,” added Martin Coats, Managing Director of MGP.

“Many were unable to continue production during the first lockdown and, therefore, put contingency plans in place to help them operate safely going forward.

“Encouragingly, this report indicates that some companies feel these actions could be sufficient to help them survive and thrive over the coming months. It is reassuring to see that confidence appears to be slowly improving despite ongoing challenges, with the number of businesses expecting growth in future sales gradually returning to pre-pandemic levels, albeit on substantially lower expectations.”

He concluded: “We hope that further support for the manufacturing sector will help avoid further disruption, safeguard jobs, and maintain future investment ambitions.”

The Manufacturing Barometer covers trading activity in October, November and December, with responses taking place in January 2021.

Images supplied by SWMAS (the South West Manufacturing Advisory Service) and the Manufacturing Growth Programme (MGP).