Manufacturing sector ‘remains buoyant’ despite challenges

The sixth annual MHA Manufacturing and Engineering report, compiled by MHA, the UK-wide group of accountancy and business advisory firms, supported by Lloyds Bank Commercial Banking and in association with the Institution of Mechanical Engineers, reveals an industry delivering revenue growth and with increased optimism this will continue in the coming year. However, UK manufacturers are facing barriers to growth driven by Brexit, increasing production costs and recruiting skilled staff.

Despite continuing uncertainty around the impact of Brexit, UK manufacturers have reported another year of revenue growth – 69% of respondents said they had experienced an increase in revenue of the last year (a 10-percentage point increase compared to the previous year).

In terms of the level of growth, over a quarter (26%) of the respondents reported revenue increases of over 10%. Optimism that this would continue was high with 78% of respondents saying they expected growth over the coming year.

Additional findings show that business confidence for the next 12 to 36 months is increasing and respondents expect production cost increases in the coming year. The survey also indicates a potential shift towards higher prices for customers and a focus on improvements in productivity and business efficiency to address cost increases.

Meanwhile, investment in research and development (R&D) remained static and 92% of respondents to this year’s survey see the Internet of Things, use of robots and automation as providing a real opportunity to the manufacturing sector.

The ability to find and recruit suitably skilled staff was also identified as the main barrier to achieving business growth over the next 12 months – a problem compounded by staff losses as a result of Brexit. Over half the respondents indicated they expected to see an increase in staff over the next 12 months with a majority (64%) focused on production staff. However, three quarters of those responding said they have problems finding staff, particularly skilled machinists and experienced engineers.

Chris Coopey, head of the manufacturing group at MHA, said: “The resilience and optimism of manufacturers and engineers, highlighted by our survey, is a massive positive for the UK in this most uncertain world. Despite the challenges they face, such as skills shortages and the impact of the large drop in the value of the pound increasing raw materials and components costs, the sector remains buoyant.

“The skills shortage is already being exacerbated by the loss of both skilled and unskilled staff from the EU. Though apprenticeships are becoming more popular, they will not match demand so there is a need to make more using less labour by utilising technology. The fact that the principles around Industry 4.0 are beginning to figure in the sector’s thinking is very good news. Investment seems to be the key to the conundrum of skills shortages and rising costs.

“By providing the right incentives, government has a key role to play in supporting and promoting the investment in automation, innovation and skills development that we need. With the finance sector in London at real risk post Brexit, the manufacturing and engineering sector should be front and centre of the government’s thinking if the UK’s economy is to thrive and grow. It’s, therefore, no surprise that businesses are keen to see a serious effort by Westminster to really commit to driving an ambitious Industrial Strategy forward.”