08.03.19

Almost a third of SME manufacturers could move supplier base out of EU

Brexit

The latest quarterly insight into the SME manufacturing sector reveals almost a third of UK manufacturers may move supplier base out of the EU and invest cash reserves in stockpiling raw materials.

Dean Barnes, regional director of Economic Growth Solutions said: “Over a quarter (27%) said they were considering relocating supply currently sourced in the EU to elsewhere – importantly, nearly 20% of this figure said they could instead seek these suppliers in the UK.  

“There is more opportunity for the UK too with 8% of UK SME manufacturers saying they could relocate suppliers currently based outside the EU to the UK…However, it is still a reduction across the board when compared to the same period last year.”

The effect of sourcing and securing new suppliers could indicate that UK SME manufacturers are investing time and resources to identify and establish relationships with suppliers.

The insight, carried out by SWMAS and Economic Growth Solutions, the SME Manufacturing Barometer, showed a slight recovery from the previous quarter, however the number of SME manufacturers reporting an increase in turnover, profits, staffing and investment in new machinery and premises has decreased compared to the same period in 2017.

Projections for the next six months are at a lower level than 2017, however some manufacturers have indicated a desire to invest in their business, while others hold off for clarity on Brexit arrangements. 

More than half of manufacturers reported that turnover had risen in the last six months, but this number is 10% lower than in the previous year.

42% of manufacturers reported an increase in profits, a slight decrease compared to 45% from the previous year.

Investment in new machinery and premises saw a decline, with just 37% of manufacturers increasing spending in this area, compared to last year’s 46%.

Staff numbers have slightly increased in the past six months, with 37% of manufacturers taking on additional staff, which is an increase on the previous quarter but below the year before’s 44% recruitment statistics.

Looking to the future, 55% of manufacturers believe that sales turnover is set to increase during the first half of 2019, which is 17% lower than the previous year.

This is compounded by fears that less than 45% of manufacturers expect an increase in profits, a decrease of 14% compared to last year.

Investment could be lower this year, with 45% expecting to invest in new machinery or premises. 43% of manufacturers believe they will increase staff numbers in the next six months, a 5% decrease on the previous year.

More than two thirds of manufacturers said they were using cash reserves to buy up and store raw materials and components, a strategy that has been adopted by other industries across the UK.

Barnes added: “While stockpiling is a popular strategy to try to head off Brexit uncertainty, it could be high-risk as it ties up a company’s cash reserves which are needed for running costs and to pay employees.”