SME manufacturers already in a serious condition due to Covid-19

Posted on 9 Apr 2020 by Jonny Williamson

Small and medium-sized manufacturers in England have been hit particularly hard by the Covid-19 pandemic, with 87% of companies identifying a significant decrease in production volumes.

The latest Manufacturing Barometer suggests a worrying diagnosis for SME manufacturers, with many businesses reporting reduction in volumes, potential job cuts and confusion around government support.

Almost 90% of the more than 330 respondents across England expect sales to drop over the next six months, while more than half predict the need to cut staff – despite the government’s furloughing scheme being introduced to boost employee retention and preserve businesses.

Worryingly, many of those who have yet to experience a direct impact are expecting the global health and economic crisis to affect their business over the coming weeks and months.

Conducted by South West Manufacturing Advisory Service (SWMAS) and the Manufacturing Growth Programme (MGP), the findings reveal a stark picture of how the virus is already affecting industrial confidence and future predictions around safeguarding jobs.

Top priorities 

Nearly 75% of firms questioned either don’t think the business support being offered is sufficient or are unsure of the help they can access.

Unsurprisingly, 86% said that financial assistance was needed most; however, there are still significant question marks over the eligibility criteria for business loans and how quickly these can be accessed, if at all.

After financial aid, overcoming supply chain disruption and detailed business advice on how to cope with the pandemic were cited as the other key priorities.

Simon Howes of SWMAS, commented: “Unlike many sectors, our manufacturing industry cannot be carried out remotely as it relies on physical interaction with machinery and parts. Current restrictions and lockdown measures in the UK mean capacity is reduced and this is reflected in four fifths of companies seeing a reduction in staff attendance.

“Companies who may still be able to produce goods are still reliant on their supply chains and a massive 80% of businesses questioned are either struggling to source materials or have seen reduced orders from customers since the Covid-19 crisis began.”

Howes continued: “Just over half of respondents have said that restrictions on exporting and importing is having an impact on their operations, so whether they trade nationally or worldwide, many small and medium-sized UK manufacturers are uncertain of what the future holds.

“Many are also concerned about how paying furloughed staff will affect their cash flow in the short term before government support becomes available. While the government’s initial support package was widely welcomed by industry, there is a need to provide deeper advice and support for manufacturers to help them to adapt and to survive.”

Silver linings

The Manufacturing Barometer shows that finding routes to new markets is one way for manufacturers to keep their business ticking over when their existing customer base is limited.

The 13% who said that their production levels have increased are supplying into the fields currently experiencing a higher than normal demand as a result of Covid-19; highlighting an opportunity for other manufacturers to support their supply chains at this difficult time.

Martin Coates, managing director of the Manufacturing Growth Programme, added: “One in five manufacturers have answered the government’s urgent call for additional NHS equipment, but many of those questioned are still unsure whether or not their offer of help will be taken up.

“As the list of products necessary to help fight Covid-19 continues to grow, SMEs should be exploring this in further detail and to find other possible opportunities for their business.”

The Manufacturing Barometer is open until 17 April for other companies interested in having their say

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