‘More support needed’ as 90% of region’s SME manufacturers admit furloughing staff

A new report out today is asking Government for further support if manufacturing SMEs in the West Midlands are going to overcome the delay in volumes returning following the impact of Covid-19.

The latest Manufacturing Barometer, the largest survey of SME manufacturers in England, highlighted that nearly 90% 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.

The report predicts that this figure is set to increase as the job retention scheme tapers off, with 46% 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 44% of companies had accessed Coronavirus Business Interruption Loans, while less than a quarter have used Bounce Back loans.

Seventeen per cent 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, said: “Nearly two thirds 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 62% of companies, with more than half suggesting business and financial support to find new customers is required.”

The Manufacturing Barometer, which questioned 81 SME manufacturers in the West Midlands, gave an insight into current trading conditions, with 89% reporting a decrease in sales over the last six months and over half (53%) 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.

More than a third (34%) are predicting an increase in sales over the next six months (5% in the last Barometer), with the same number 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 (48%), identifying new customers and suppliers (47%) and, encouragingly, more than two fifths (42%) have chosen to upskill their workers.

“There are still everyday issues they are trying to come to terms with. 91% have had to review cashflow forecasts, 44% have seen production put on hold due to no fault of their own and 37% 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 31% of manufacturers suggesting that Covid-19 has disrupted their planning for Brexit.”