Brexit challenges threaten to slow manufacturing’s comeback in the East Midlands
Brexit issues are causing SME manufacturers in the East Midlands “significant disruption” as they look to recover from the economic effects of Covid-19.
The latest Manufacturing Barometer, which is produced by the Manufacturing Growth Programme (MGP) and SWMAS (the South West Manufacturing Advisory Service), reveals nearly two thirds of companies have seen negative price changes within their supply chain since leaving the EU, with the availability of raw materials an issue for 40% of firms.
Of the local respondents, half cited importing goods as causing short and long-term hits on volumes, yet just 20% had seen problems with exporting products – the least of any region in England.
This survey also highlighted that just a quarter of SME manufacturers feel they are getting the right support and guidance from Government on how to navigate changes caused by Brexit, underlining the need for better communication and additional tailored support.
On a more positive note, East Midlands firms lead the way when it comes to optimism about reshoring, with 35% of businesses believing Brexit could deliver new opportunities as firms look to bring their supply chains closer to home.
“SME manufacturers have had to deal with unprecedented levels of change over the past 12 months and it is encouraging to see some green shoots of how the sector has adapted throughout this difficult time,” explained Martin Coats, managing director of the Manufacturing Growth Programme.
“However, despite signs of an initial recovery, firms have a new set of issues to contend with now the Brexit deal is done. Price hikes in the supply chain have been immediate, and we are hearing tales of lead times being extended on raw materials.
“Three quarters of respondents aren’t convinced that the Brexit guidance they have already received from the government is adequate and SMEs are asking for more clarity on key issues, such as sourcing components/services overseas (70%), logistics or freight forwarding (50%) and product markings (50%), including a CE replacement. These challenges need to be addressed and quickly.”
He continued: “Reshoring has been spoken about as a potential opportunity and there is some confidence from manufacturers that new purchasing trends might drive increased sales to the UK. We would love to see more made of this and perhaps even a co-ordinated campaign to promote the benefits of locating production back home.”
Away from Brexit struggles, the latest Manufacturing Barometer paints a more optimistic picture of industry slowly starting to bounce back from Covid-19.
Results show that 40% of SMEs have seen sales increase over the past six months, with a massive 60% expecting further growth between now and August.
“Just under a third of firms are planning to take on staff going forward, whilst 45% are planning to spend more on new machinery and capacity as they look to replace sales volumes lost in previous months,” added Coats.
“Many were unable to continue production during the first lockdown and, therefore, put contingency plans in place to help them operate safely going forward.
“Encouragingly, this report indicates that some companies feel these actions could be sufficient to help them survive and thrive over the coming months. It is reassuring to see that confidence appears to be slowly improving despite ongoing challenges, with the number of businesses expecting growth in future sales gradually returning to pre-pandemic levels, albeit on substantially lower expectations.”
He concluded: “We hope that further support for the manufacturing sector will help avoid further disruption, safeguard jobs, and maintain future investment ambitions.”
The Manufacturing Barometer covers trading activity in October, November and December, with responses taking place in January 2021.