Manufacturing SMEs set to target growth and investment

A survey of over 1,000 SMEs, conducted by Opinium on behalf of Paragon found that, despite wider economic challenges, 45% of firms in the sector are expecting turnover to increase, with a further 30% planning for it to stay at its current level.

Optimism within the sector is matched by plans for investment, with 55% of manufacturing SMEs set to increase investment in their businesses in the next 12 months – and a 29% to maintain current investment spending.

The findings come as part of a national poll into UK SMEs, which found that nearly a quarter of all businesses (23%) expect turnover growth of up to 5%, with 14% forecasting growth of between 5% and 10%. A further 7% expect growth of above 10% during the period.

A similar proportion of companies (48%) said that their business had grown over the previous 12 months despite the economic challenges and issues of the pandemic, with 29% saying turnover had reduced.

The predicted growth for SMEs is mirrored by investment plans, with 42% increasing investment in their businesses and a further 37% maintaining their level of investment – compared with only 20% reducing investment.

When asked how they considered the current position of their business, a third of SMEs (34%) described their business as thriving, with half (51%) stating their business was stable. Just 1% of companies said they were struggling to keep the business afloat, with 14% stating the company was recovering.

While the research highlights predicted turnover growth and increased investment in the year ahead, it also has identified the challenges SMEs are preparing for, citing as potential risks:

• Raising inflation impacting customers (23%)
• Cost increases (20%)
• Supply chain disruptions (11%)
• Impact of Brexit (10%)
• Impact of the pandemic (9%)
• Staffing recruitment and retention (8%)

Commenting on the growth outlook for the construction SME sector Wayne Hall, Paragon Bank’s Business Development Manager for manufacturing, said:

“The resilience shown by manufacturing SMEs over the last 12 months has been central to overcoming the challenges created by the pandemic and, as this new research shows, that resilience is set to continue with expectations for further growth and increased levels of investment.

“By investing in their businesses SMEs can increase the range of services they can provide to clients as well as develop more energy efficient production methods, such as robotics, automation and cleaner, more efficient machinery to safeguard their businesses from looming energy increases. At Paragon, we are delighted to support businesses achieve their growth objectives and are ready to support firms throughout the times ahead.”

Commenting on the national research findings John Phillipou, Paragon Bank’s Director of SME Lending, said:

“SMEs are the backbone of the UK economy and, as this new research demonstrates, even though they are continuing to face a series of challenges they remain resilient and plan to continue growing and investing in the year ahead. Despite uncertainty over fuel and energy costs, SMEs know that they need the equipment and assets to fulfil the workload ahead. This will drive the need for careful financial planning alongside any investment in equipment.

“Their success is fundamental to our country’s growth prospects and it is vital they have access to the financial support and tools necessary to meet the challenges they may encounter.

He continued: “With concerns over supply chains, SMEs may require invoice financing support to ensure they continue to have the necessary cashflow to maintain their operations. Also, through refinancing they can access the equity in their existing assets to help fund their growth objectives.

“Seeking financial support can be a pragmatic, practical solution for successful businesses and, at Paragon, we are keen to do what we can to support businesses in navigating the years ahead.”