‘Survival rather than growth’ - 81% of manufacturers say government support inadequate

15 Feb 2023

Published in: Member News

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Government Support Inadequate Say Manufacturers

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‘Survival rather than growth’ - 81% of manufacturers say government support inadequate

New research from national audit, tax, advisory and risk firm Crowe shows the vast majority (81%) of the UK’s manufacturing sector believe they are not receiving adequate government support in light of ongoing economic instability.

Despite this, sustainability remains in focus as 66% have continued to invest in becoming carbon neutral.

• 81% of manufacturers believe that government support for the sector is inadequate

• Over a third (38%) believe that global and economic conditions will be the main barrier to growth in the next 12 months

• Resilience remains, with 60% predicting growth in turnover, but optimism has tapered, as this figure is down from 74% last year

• 66% of the sector has invested in becoming carbon neutral this year

• Just under two thirds (62%) have seen wages stagnate, despite rising inflation and the ongoing cost of living crisis

• Brexit finally takes a back-seat with only 6% identifying Brexit as a main barrier to growth

• Downward trend of R&D claims and digital manufacturing is worrying for innovation in UK plc

Now in its fourth year, Crowe’s annual Manufacturing Outlook Report, produced in association with the Confederation of British Metalforming (CBM), collates results from a survey of respondents across the UK manufacturing community.

The findings demonstrate that the sector has been drastically impacted by ongoing economic turmoil and lack of government intervention, but that growth prospects remain relatively strong, with 60% expecting turnover to grow despite such challenges.

This is a drop-off in overall sentiment and confidence from a year ago, when three quarters (74%) of respondents cited positive growth expectations.

There has been a significant increase in concern around global economic factors (38% see it as the main barrier to growth, ahead of recruitment challenges which topped the list last year), which reflects the impact of global supply chain pressures and the conflict in Ukraine.

Meanwhile, just 10% of respondents (down from 17% last year) see working capital/cash as a main barrier to growth in the next 12 months.

This is indicative of a sector focussing on survival rather than growth, especially given the ongoing economic hardship and rising energy costs, which were previously not featured as a concern at all (but now ranks third, behind only the economy and staffing challenges).

The spectre of Brexit remains, but is less of a concern than in recent years, ranked by only 6% as a key barrier to growth, down from 10% last year and 25% in 2020, showing that businesses are increasingly getting to grips with the challenges, as well as having to focus their attention elsewhere.

Of greater concern is the worrying trend of declining R&D claims. In 2021, 65% of respondents made an R&D related claim (59% in 2020 and 67% in 2019).

The stark drop-off to just 38% for 2022 (a 42% drop) is a concern in that innovation may suffer, and there is a similar story being told around Industry 4.0 sentiment.

While it is notable that 54% of respondents continue to think there be a significant or partial shift to replace traditional manufacturing methods, this figure is down from 61% pre-pandemic. It is encouraging to note that 66% of respondents had already invested in working towards carbon neutrality.

Reporting requirements have seen many manufacturers drive this initiative down their supply chain, while the impact of staggering energy cost increases, at a level that jeopardises profitable business models, is surely driving this trend, too.

Johnathan Dudley, Head of Manufacturing at Crowe, said: “It is a case of survival not thrival at the moment, despite the best efforts of manufacturers.

“While business is positive about growth prospects, the UK will not achieve the Chancellor’s ambition of becoming ‘the next Silicon Valley’ without drastic change to help stimulate the sector. More strategic thinking, in place of short-term tactics, is required to support innovation.

"Without such incentives, the Chancellor will be left with an (un)-Happy Valley, rather than the Silicon Valley he desires.

“The ‘gamble’ of investment during a downturn must be weighed against the risk of businesses failing because of a lack of such strategic investment.

"The successful businesses will be those that manage their risks, anticipate trends and act on the opportunities presented by them. Government should act to facilitate this success and restore manufacturing as the nation’s lifeblood.”