Each month, The Manufacturer explores a section of the latest Annual Manufacturing Report, which gauges the mood of leadership teams on issues such as Skills & Training, Government Policy & Industrial Strategy, and Finance & Investment. This month, we look at Growth & Exports.
The key takeaway from the Growth & Exports section is that growth is not a nice-to-have, but an absolute must-have. The drive for growth in manufacturers’ product ranges, in sales, in productivity, in market share, in exports is relentless.
We focus on growth here, but in truth every other section of the Annual Manufacturing Report 2019 features an aspect of business that affects growth.
There is Brexit, of course; access to finance for investment; skilled staff and how to recruit them; and the digital smart factory technologies that can exponentially increase productivity.
They all play a part, so in this section of the survey we gauged mood and ambition, to see if UK manufacturers still have a tiger in their tank after a couple of years of profound uncertainty over Brexit and yo-yo exchange rates.
The cost of regulation
A further factor is the drag on growth created by regulation. According to a recent report by the FSB and the Centre for Economics and Business Research (CEBR), the cost of government regulation has hit UK manufacturers particularly hard.
Between 2011 and 2017, costs attributed to government regulation and policy rose by 19%, on average £60,000, nearly all that in 2016 and 2017.
These are costs associated with statutory wage levels, pension auto-enrolment, and tax compliance. And they all must be paid before a penny is made in profit.
It perhaps explains why last year the UK dropped from the fourth best country in the world to run a business to ninth (World Bank.). Although, that’s still better than all other EU nations, by the way.
Only 13% say they are super-confident they know how to grow their business, but with the next two levels of confidence standing at 37% and 29%, we can say with some certainty that most UK manufacturers are feeling confident.
Yes, 21% are on the negative side of that graph, but not every company feels like a champion, and is maybe having trouble seeing where growth is coming from.
Manufacturing Advisory Service
These are companies who would benefit from an organisation such as the Manufacturing Advisory Service, part of Business Growth Services, whose demise in 2015 following a government spending cut was much-lamented by manufacturers who had benefitted from its services.
The gap has not been filled by the private sector, despite the Treasury’s hopes.
Several of the businesses highlighted positive experiences of working with the Manufacturing Advisory Service, prior to it being unceremoniously wound up.
One business leader noted that the support offered by the Department for International Trade had been largely stripped back, and “they don’t have the funds to help reduce the risk or outlay of attending an international trade show.”
When asked if their companies had a growth path baked into their existing processes, the positive figure is 69%, again with the super-confident quite low at just 8%.
Perhaps it’s a coincidence, but virtually the same level of confidence is demonstrated when asked about exports (67% positive) the obvious inference being that companies regard conditions for exporting as good.
Government help needed
At a time when we are inevitably concerned about the future trading relationship with the EU, it’s worth remembering that a great many companies export outside the EU, accounting for 52% of our exports (ONS, 2016).
Translate that into the direct question of whether UK manufacturers are actively seeking new markets, and that positive figure increases to an encouraging 71%.
More than half of our respondents (55%) say that government should do more to help exporters, a proportion unchanged from last year.
Laura McBrown of G&B Electronics suggested that the government has too little appreciation for the challenges SMEs face when trying to export, particularly considering the Brexit red line over the customs union.
“I am concerned that the government does not have sufficient understanding of the effect of globalisation on the supply chain and the impact that coming out of the customs union and trying to qualify for trade deals is going have on the UK manufacturing industry,” she said.
“Unless you have real-time visibility and insight into your business, you can’t make the necessary decisions to drive that growth trajectory. Increasingly, more of the data informing your decisions will come from embedded analytics and connected devices, so it’s paramount that manufacturers have a modern enterprise resource planning foundation to support the innovative technologies which enable real-time reporting, analytics, automation and the Internet of Things.”
Mark Hughes, Regional VP UK&I, Epicor – sponsor of the Growth & Exports section of the Annual Manufacturing Report 2019
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