Challenges Ahead for Manufacturing
Posted by Guest Blogger on 13 Apr 2010 | Tagged as: Guest Blogger, Manufacturing
Posted by guest blogger, David Raistrick, UK manufacturing industry leader for Deloitte, based in Leeds
Although UK manufacturers have been through some tough times, our latest survey of UK manufacturers has some encouraging news with almost two-thirds of manufacturers (62 per cent) expecting the availability of credit to remain the same or improve in the coming 12 months. It also reveals that the industry is responding positively to the economic challenges by making use of available public sector funding, with 63 per cent declaring a good understanding of available grants and incentives whilst 33 per cent of manufacturers have sought capital from alternative sources such as shareholders or parent companies.
The overriding message is that while the market is tough, manufacturers have been resilient in their response. The easing of available credit is very welcome, but there are no signs of complacency with manufacturers seeking other appropriate sources of finance where necessary. Manufacturers have also proactively sought to limit their exposure to bad debt, with 65 per cent increasing the frequency of customer credit checks over the past 12 months.
The survey highlights grant funding as one area where there is still some room for improvement. Whilst the majority of manufacturers have a good understanding of grants and other incentives, a significant minority remain in the dark. Almost one in five said they did not know where to look for information on grants, for example, with another 19 per cent not yet having considered grants as a source of funding – this suggests that some manufacturers are losing out on additional funding.
The report found that 55 per cent of manufacturers intend to invest in plant and machinery over the coming 12 months, with 54 per cent of respondents intending to invest in new product development. This shows the appetite for investment from the industry so we would encourage all manufacturers to take advantage of the funding available to them. This will be important as manufacturing emerges from the recession and looks to a future which will require investment in R&D, training and retraining and capital expenditure on new plant and machinery.
Overseas markets
The report also asked manufacturers about their intentions for the coming 12 months, focusing on investment and exports. Seventy-one per cent of respondents said they expected to increase their exports over the next 12 months, with 41 per cent planning on a double-digit increase. However, a sizeable minority of 29 per cent expected no increase at all. Seventy-five per cent of manufacturers will focus their export strategy on the Eurozone. The US and China were identified as the other key regions, with 45 per cent looking to increase trade with the US and 30 per cent with China.
These are confident figures from UK manufacturers, without being overly bullish. As the comparative value of sterling remains low and confidence in global markets picks up, there will be opportunities for manufacturers to increase their exports. However, for every willing seller you need a willing buyer and as growth in many of the major economies remains anaemic the extent to which this can happen is to some degree out of UK manufacturers’ hands.
(Survey was carried out 2-9 February 2010 by Findlay Media in association with Deloitte, and surveyed 101 manufacturers based in the UK. “Pound for Pound” is the second in a series of quarterly Point of View surveys examining key issues affecting UK manufacturers in seeking access to finance. The full report is available at www.deloitte.co.uk/pointofview
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