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Brexit uncertainty amid Covid-19 causes SME gloom

Posted on 16 Nov 2020 and read 303 times
Brexit uncertainty amid Covid-19 causes SME gloomOnly 3% of small to medium-size manufacturers in England believe Brexit will have a positive impact on their recovery according to the stark findings of the latest Manufacturing Barometer.

The report, which gathered intelligence from 409 companies from around the country, revealed that uncertainty is still holding many management teams back, with 47% admitting they have no idea how the transition out of the European Union will affect their business.

This worrying message is reinforced by an industry that is still besieged by Covid-19 and living with constant changes to the way they operate. 62% of respondents are still trading below pre-pandemic levels, while more than a quarter feel it will take between one and five years to get back to normal.

Conducted by the South West Manufacturing Advisory Service (SWMAS) and the Manufacturing Growth Programme (MGP), the survey is the largest of its kind in England and highlighted that nearly half of SMEs are still not convinced that the financial support currently in place will be enough to help them survive Covid-19.

When asked about the financial assistance they require now, the top answer from 43% of respondents was grants towards capital investment. This shows an appetite to spend, in order to improve productivity and achieve more sales, but indicates that further support is still needed to make this happen.

Perfect storm

Nick Golding, SWMAS managing director (pictured below), said: “SME manufacturers have been battered by Covid-19 and now they have the additional challenge of recovering with Brexit looming large on the horizon. It is like a perfect storm for management teams trying to plan, but have no idea what they are planning for, and many are also coping with lower levels of resource as a result of the pandemic.

“Our findings tell us that the majority of firms do not think the transition from the EU will be a positive for their business and more support will be required to help them adjust to the new trading conditions, whatever they eventually look like.”

He continued: “Many manufacturing firms will be affected by issues, such as information transfer from Europe and new labelling requirements, even if they only supply into the domestic markets. The message is clear, businesses will need to regularly review the government transition support page for further clarity as and when it is published.

“There are some positives in the findings. Nearly a quarter of companies have seen an increase in trade and a further 14% say that sales have not been affected by Covid-19. This highlights the innovation of our SMEs and their ability to adapt in order to supply customers in new markets.”

MGPThe Manufacturing Barometer, which is used to inform future Government industrial policy, highlighted a general recovery in performance from England’s small to medium-sized manufacturers.

28% of companies have increased sales between April and September as the marketplace has picked up slightly, with 40% predicting growth over the next six months.

Encouragingly, nearly a third are expecting to recruit more staff and similar numbers (38%) are committing to investing in their business - a 7% increase from the number who predicted this in July’s Barometer. This reinforces the fact that a number of SME manufacturers are prioritising investments now to enable growth going forward.

Martin Coats, MGP managing director, said: “One of the key things we wanted to identify this time is what support companies are actually looking for to cope with the current situation and, ultimately, the assistance they need to grow.

“Boosting productivity and process development, such as automation, was the main priority (35%), followed closely by skills development (34%), product diversification (33%) and support to enter new markets (31%). This has probably been accelerated by the impact of Covid-19 and companies looking for ways to access new sales opportunities quickly.”

He concluded: “This is really important industry intelligence that we can hopefully use to lobby Government for bespoke support and more tailored financial grants to meet these pressing needs.”