South West manufacturers’ plans to move their supplier bases out of the EU ahead of Brexit could create vital opportunities for the region’s suppliers. That’s according to the latest quarterly insight into the sector, the SWMAS Manufacturing Barometer.
The survey found that 16% of the South West’s SME manufacturers are now looking for suppliers in the UK to replace those currently sourced in the EU. A further 5% are considering moving supply now sourced outside the EU to the UK. Simon Howes, CEO of Exelin Group (encompassing SWMAS) said:
“The desire to source new domestic suppliers indicates UK SME manufacturers are nervous about securing supplies post-Brexit, but this could provide a short to medium term boost for UK businesses if they can meet this need. This comes at a time when companies like Honda say they are moving production out of the UK, a move which will negatively affect their supply chain and create a hole in forward orders. Our research shows a much-needed chink of light with new opportunities coming to the market.”
The Manufacturing Barometer also explored manufacturers’ specific plans to stockpile – an intention that first came to light in the previous Manufacturing Barometer. Amidst the continued Brexit uncertainty, more than two thirds (71%) said they were using cash reserves to buy up and store raw materials and components.
“Stockpiling looks to be a popular strategy to try to head off Brexit uncertainty, but it is creating its own issues, including impacts to cashflow and reports of some suppliers’ stock levels running low.” adds Simon.
This is against a background where although manufacturers across the South West report an increase in the number of staff in the last six months, the number who have experienced an increase in sales has dropped to 51% (12% fewer than 12 months ago). This does not bode well for UK productivity and businesses will need to keep an eye on their competitiveness whilst navigating through these changes.
Projections for the next six months are also at a much lower level than this time a year ago and although some manufacturers indicate a desire to invest in their businesses, many continue to hold off. 49% expect sales turnover to increase during the first half of 2019, that’s a full 26% down on the previous year. Fewer than half (45%) expect an increase in profits, down 20% compared to last year. Similarly, just 41% expect to invest in new machinery or premises, 17% down on the corresponding quarter in 2017, and 47% believe they will increase staff numbers in the next six months, down 6% on the previous year.
Simon Howes continued:
“As seen in previous Manufacturing Barometers we can see the characteristic determination and pragmatic approach shown by South West SME manufacturers in uncertain times, and compared to last quarter’s forward projections we have seen a partial recovery in the number of manufacturers across the region anticipating profits and recruitment to increase in the next six months.
“However, we must acknowledge that turnover is down compared to this time last year and this is being driven by a lack of clarity on future trading conditions and uncertainty over customer demand.”
“As we head into the final weeks before the scheduled Brexit date South West manufacturers are doing what they can to adapt their businesses. Our research highlights that around half are holding back on investment and recruitment and struggling to increase sales and profits. Brexit is clearly amplifying the pressures manufacturers have to manage and whilst SMEs can be more agile they also have fewer resources to navigate and manage change.”
“The latest Barometer shows the challenges of securing the supplier base and cost of addressing stock levels are diverting these limited resources from the sector. “Our SME manufacturers need support at this vital time to ensure they remain competitive, that any business casualties are minimised and that they have the resources to grasp any emerging opportunities.”
The full SWMAS South West Manufacturing Barometer Winter 2018-19 report can be found here.