Optimism amongst SME manufacturers despite staffing and supply chain issues

Small and medium-sized manufacturers are continuing to bounce back from the pandemic despite experiencing significant supply chain and recruitment struggles.

The latest Manufacturing Barometer, which surveyed more than 400 SMEs across the UK, shows that nearly two thirds (64%) of companies are expecting to grow over the next six months and 52% plan to invest in capital equipment and manufacturing.

For the first time in over a year, the report also revealed that more firms are trading at increased levels than they were before Covid-19, highlighting the resurgence in fortunes since lockdown eased.

The data is set against a backdrop of disruption, with 60% of respondents stating that staff are having to spend additional time liaising with suppliers and, despite growing sales, just over half are being forced to increase product prices to recover some of their additional costs.

Organised by the South West Manufacturing Advisory Services (SWMAS) and the Manufacturing Growth Programme (MGP), the survey painted a concerning picture around staff retention and recruitment.

Over 60% of SME manufacturers have lost skilled staff since the beginning of the Covid-19 pandemic and, worryingly, almost three quarters said they have been unable to replace these employees – pointing to a widening skills gap that could drastically impact the recovery over the next year.

“Throughout the past 18 months, manufacturing has exceeded expectations in its ability to innovate and adapt to current conditions, but external factors are still presenting problems,” said Nick Golding, managing director of SWMAS.

“Lead times are being extended, logistics costs are going through the roof, and energy/material prices are extremely volatile. This all results in complex challenges for manufacturers across the UK.”

He added: “The improved confidence in future sales is not translating into increasing confidence for future profits. The ongoing supply chain challenges mean many businesses have had to reallocate and add additional resources to address these issues.

“In fact, respondents are currently having to commit an average of two full time employees to manage suppliers and customers, a number that often equates to between 5-10% of a SME manufacturer’s workforce.”