Nine in ten firms unhappy with government support for manufacturing sector - report

A snapshot of the UK’s manufacturing sector reveals nine out of ten firms are unhappy with the government’s support for the sector.

Audit, tax, advisory and risk firm Crowe has released the results of its Manufacturing Outlook Report 2024, examining how the UK government can best support the sector.

During a period of high inflation, political changes, and continued strained supply chains, Crowe’s analysis – conducted in partnership with the Confederation of British Metalforming (CBM) - looks at the key issues impacting manufacturers. Read the full report here.

Key findings from nearly 90 respondents, include:

• A vast majority – 87 per cent - of manufacturers are unhappy with the government support currently provided to the sector
• 45 per cent view current global turbulence and economic conditions as barriers to growth
• Nearly 7 in 10 manufacturers expecting a growth in sales this year
• 70 per cent invested in carbon neutral initiatives last year, a third increase on 2023
• 70 per cent have increased wages for workers in line with inflation
• 71 per cent believe that industry 4.0 technology will have a significant effect on the sector
• Only 5 per cent of respondents cite energy as a barrier to growth, down a fifth on 2023

Crowe’s analysis shows that the effect of global conditions, including geopolitical tension and conflict, global and national inflationary pressures, and political turbulence, are having an increasing impact on the sector.

It’s fair to aggregate these concerns with the Brexit and trading tariff results, with more than half of respondents stating they have a significant concern around supply chain uncertainty.

However, even with these considerations, there is evidently a spirit of business flexibility and “knuckling down” in the face of global and national political issues, with 68 per cent of respondents to the survey expecting turnover to grow over the next year – a testament to the resilience of the sector.

The demand for investment and willingness to invest in manufacturing were significant considerations for respondents.

The survey results show that use of own cash resources has predominantly funded businesses this year, correlating to what has been seen in the market with limited short-term demand for capital investment finance.

Johnathan Dudley, partner and head of manufacturing at Crowe, said: “There is a clear reluctance to invest and borrow, and with funding from the government reducing as COVID-19 loans start to pay down, there is a real need for government intervention.”

“Reshoring and near shoring should be back on the agenda, as access to raw materials, expertise, and the necessary funding to capitalise on the opportunities at hand are essential.

“For example, at present, the UK is incredibly efficient at recycling steel scrap, but only 25 per cent of it is processed and retained in the UK for supply, while the rest is exported. Local sourcing and greater control of supply chains is clearly necessary.

Interestingly, there has been a reduction in concerns over energy costs (only 5 per cent of respondents cite it as a worry), largely due to increased investment in decarbonisation, with 70 per cent of respondents investing in carbon neutral initiatives, in tandem with falling prices compared to the year before.

What is encouraging is the UK’s status as a world leader in renewable energy production and the growing investment in decarbonisation.

However, this is only possible through government funding into new technologies in manufacturing, aerospace and automotive. Strategic allocation of this investment into UK manufacturing is crucial.

Mr Dudley added: “Large numbers have been thrown around by politicians in terms of support for manufacturers, but the proof will be whether this is actually spent on what the sector needs, as evidenced in this report.

“Businesses in this sector face many challenges, from financing to recruitment, but a looming election offers some hope. I’d like to see greater support for UK businesses, and a reduction of regulatory barriers for manufacturers in recognition of the vital role they play in the UK economy.

“The UK has a rich history in manufacturing. For this to continue, it is high time that a dedicated Minister for Manufacturing was established to unlock the sector’s potential and allow the UK to revive its position as a global manufacturing hub.

“Determining a long-term strategy, a Minister for Manufacturing can light the fuse of a new industrial revolution in the UK by aligning innovation, economic development, education and support nearly a million green jobs to help get this country making, building and adding value again.”

Pictured: Hayley Lavery (director, Corporate Audit at Crowe, with Melinda Jean of CBM and Johnathan Dudley at the Mach exhibition in Birmingham