Gateley – Manufacturing making good progress
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Paul Cliff, Corporate partner, Gateley LLP |
AS the UK economy continues to pull itself clear of the recession and economic downturn, one sector in particular continues to shine. According to the CBI, manufacturing in the UK contributes £140bn to the UK’s economy each year and employs more than two million people. In the Midlands, the sector still represents a key part of the economy. Despite slower growth reports for the West Midlands economy in April, there has been a lot of evidence suggesting that investment, M&A activity and expansion is set to continue further into 2014. Examples include the £40m fund being launched by the National Aerospace Technology Programme (NATEP) to support growth in the UK’s aerospace industry – this will be based in Coventry and will create 1,200 jobs. And that cornerstone of the region’s manufacturing success, Jaguar Land Rover, announced an 8% increase in first quarter sales this year. A survey of UK manufacturers by The Manufacturer in April 2014, suggests that 94% of respondents are very or quite optimistic about prospects for their businesses. More than half (58%) of companies invested more in machinery and tools in the last financial year than in the previous one. There are some signs that the lending environment for businesses in the sector may be stabilising too. The Chancellor, George Osborne, earlier this year set British companies a target of doubling exports by 2020 and announced a new export credit scheme backed by the Bank of England to reduce the risk to exporters. Manufacturers are likely to be beneficiaries of this scheme. Banks continue to pledge to lend more to SME’s and whilst there is more to be done to improve access to finance, recent BBA statistics show an annual growth in borrowings by manufacturers in the year to January 2014. There are also signs of M&A activity in the sector with the UK (including the Midlands) an attractive source of acquisitions for buyers. The industrial and chemicals sector was second only to TMT in Q1 2014 UK deal volumes according to a report by BDO on deals planned or in progress. As economies grow out of recession, risk of insolvency presents a challenge. According to a report by Exaro in March 2014, company failures are “on the rise again” in the UK. Manufacturing is not immune – year on year, administrations, winding-up orders and the appointment of liquidators were up in 2014, with only winding-up petitions down on the previous year. Experts suggest this is not unusual. Businesses in the sector also cite skills as a major challenge, along with costs of complying with legislation and regulation, notably pensions auto-enrolment. However, there is an overall sense, a growing confidence, that manufacturing in the UK and in the Midlands is robust and set for a period of steady and sustained recovery. More articles in
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