Manufacturing SMEs struggling with high materials costs

The report, from GE Capital which specialises in providing finance for SMEs, is based on interviews with 500 UK SME owner-managers and shows that three in five (60%) of companies in this sector see high raw materials and inventory costs as one of the three biggest limitations on their success, making it the biggest concern amongs UK SMEs in the manufacturing sector. The worry over costs was higher even than fears over the health of consumer and business spending in the UK, which 28% of SMEs in this sector identified. • 60% of companies see high raw material and inventory costs • 31% say the increased burden of regulation • 28% say fears about consumer and business spending • 17% see price of fuel as one of biggest limitations "As the country teeters on the edge of a fragile turnaround the Government must deliver a robust budget in support of the UK's 320,000 SMEs in the manufacturing sector if it is to avoid stifling their recovery," said John Jenkins, UK CEO, GE Capital. "Britain's manufactures must not be overlooked. With nearly 74000 firms still saying that they will shrink this year, it is vital that Government continues to focus on maintaining the right conditions to support growth. Top of the list will be ensuring confidence in sterling so that interest rates can remain low. In addition the Government should take further action to reduce the burden of regulation and limit the impact of rising fuel costs, including the proposed increase in fuel duty planned for later in the year." The report also shows that the UK government's emphasis on an upturn that will be largely export-driven may be at odds with the expectations of small and medium sized enterprises that account for over 50% of domestic GDP. The vast majority of UK SMEs (78%) in the manufacturing sector said that they expect their growth to come from domestic sales over the next three years making them reliant on the fortunes of the UK economy. Additional cost-focused worries include the increased burden of regulation (31%) and the price of fuel (17%) – with the duty on fuel due to rise again on April 1. Reassuringly, fewer than one in ten businesses (6%) in the manufacturing sector put a lack of available investment as one of their top three growth challenges. This compares favourably with research pre downturn (2007) when 10% put it in their top three.