Redundancies on the way as manufacturers face up to life after furlough

A third of East Midlands manufacturers are set to make redundancies between now and the end of the year, according to a new survey.

The latest Manufacturing Barometer, the largest survey of SME manufacturers in England, highlighted that two thirds of firms in the region took the decision to furlough staff and almost a third (30%) have already made redundancies as they look to get through the economic shock of the pandemic.

This figure is set to remain the same as the job retention scheme tapers off, with 32% indicating further job losses between now and the end of the year.

Conducted by SWMAS (South West Manufacturing Advisory Service) and the Manufacturing Growth Programme (MGP), the report showed that 34% of companies had accessed Coronavirus Business Interruption Loans, whilst the same number have taken advantage of Bounce Back loans.

Some 21% of management teams have already taken additional financial steps to protect their businesses, including personal loans and re-mortgaging commercial or residential properties.

Martin Coats, managing director at MGP, commented: “64% of manufacturers have told us that they are either just surviving or recovering and this, along with the other data, tells us that there is an urgent need for further business support, which the Government could help with.

“Industry is very resilient, but it is very difficult to plan for sales stopping overnight across numerous sectors and then you’ve got the added complications of supply chain interruptions and trying to organise factories that are Covid-19 secure.”

He continued: “The furlough scheme has protected thousands of jobs, but the Government may have to consider additional support until sales and revenues are more consistent or start to reflect levels seen prior to the pandemic.

“VAT payment holidays would be welcomed by half of companies, with over two fifths suggesting business and financial support to find new customers is required.”

The Manufacturing Barometer, which questioned 44 SME manufacturers in the East Midlands, gave an insight into current trading conditions, with 77% reporting a decrease in sales over the last six months and 40% indicating a reduction in capital spend.

There were some grounds for optimism when compared with the results of the previous report though and the first early signs of companies feeling more confident about their future prospects.

Meanwhile, 38% of companies are predicting an increase in sales over the next six months (7% in the last Barometer), with just over a quarter expecting a rise in profits going forward.

Coats added: “Manufacturers have tried to use the slowdown in activity as effectively as they can. Many have focused on process improvement to boost efficiency (43%), identifying new customers and suppliers (52%) and, encouragingly, nearly half (48%) have chosen to upskill their workers.

“There are still everyday issues they are trying to come to terms with. 80% have had to review cashflow forecasts, 43% have seen production put on hold due to no fault of their own and the same figure have had to contend with customers extending payment terms.”

He concluded: “These are all difficult situations and require specialist business support and access to grants/financial help to overcome. That’s why we’re urging the Government to look at ways where they can extend the assistance available to our sector, especially with 27% of manufacturers suggesting that Covid-19 has disrupted their planning for Brexit.”