The cost-of-living crisis has been covered extensively in the media but what has been less comprehensively reported is the rising cost of ‘doing business’. The latest independent research* carried out by
Close Brothers Asset Finance and Leasing sheds more light on the impact mounting costs are having on manufacturing and engineering businesses.
Steve Gee (pictured), CEO of Close Brothers Asset Finance’s industrial equipment division, said: “Starting with some good news, our recent survey of manufacturing and engineering UK SMEs tells us that in spite of the multiple pressures facing them, the appetite for borrowing to invest in growth is the strongest it has been since we started surveying business owners, with 78% (UK average 67%) of manufacturing and engineering respondents answering “yes” to the question ‘does your business plan to seek funding for business investment in the next 12 months’.
While investment intent is strong, some 45% (UK average 40%) of manufacturing and engineering firms have missed a business opportunity in the last 12 months due to a lack of available finance. In addition, confidence in the economy has cooled, with 51% (UK average 54%) of construction firms concerned about further economic slow-down.
Impact of inflationAccording to the Close Brothers research, 58% of manufacturing and engineering businesses have been negatively impacted by rising inflation, while 39% feel the Bank of England’s target of 2% is realistic in today’s high-inflation business environment (UK average 33%). A further 45% don’t feel raising interest rates is the right thing to do to help curb inflation (40% ‘yes’; 15% ‘unsure’).
While businesses have been asked not to raise wages, 63% of manufacturing and engineering operators will be doing just that as they try to help their staff keep up with rising costs.
In addition, four-fifths of manufacturing and engineering firms plan to pass additional costs onto customers (29% ‘fully’; 52% ‘partially’) while the remaining 19% have chosen to absorb the costs, which will in turn have an impact on their cashflow. Four in 10 admitted the increased cost of doing business has caused them to experience cashflow problems.
Our viewMr Gee continued: “Businesses have, for some time now, borne the brunt of both rising costs and inflation along with supply chain problems that have made it difficult to plan – both finances and stock – while trying to meet customer demands. But it is encouraging to see that firms are still keen to invest despite all the challenges they are facing.”
*All figures, unless otherwise stated, are from a Censuswide survey conducted in July 2022. The survey canvassed the opinion of 911 SME owners across the UK and Ireland and across several industries on a range of issues affecting their businesses.