Published on 05/03/12

MANUFACTURING SECTOR UPBEAT ABOUT 2012 GROWTH PROSPECTS

Report Reveals almost 80% of UK Manufacturing Firms are Confident of Growth this Year despite Eurozone Fears

A report published by MHA, the UK wide group of independent accountants and business advisers, shows that the manufacturing sector is upbeat about growth prospects for 2012, with one third (33%) predicting growth of over 10% growth and a further 45% estimating growth of up to 10%.

However this show of confidence is set against a backdrop of over 90% of manufacturers saying they don’t believe that the Government has a specific manufacturing strategy in place and that the sector remains neglected at policy level. They believe it also fares badly against competitor economies such as Germany, Norway and Japan who reap the benefits of continued investment in their industries.

MHA which includes Birmingham city centre Chartered Accountants Bloomer Heaven (based in Colmore Business District) says that despite the criticism of the Government, there is clear proof that the economic situation is improving for manufacturers as Chris Barlow, director of Bloomer Heaven explains:

“The survey among 145 manufacturers and engineers – including several within the Midlands – highlights a number of positive indicators regarding growth and prosperity in 2012. These include the fact that 60% of respondents plan to take on apprentices or trainees this year and that nearly 50% plan to increase capital expenditure.

“The situation regarding taking on more apprentices is very encouraging but a major concern is that while Government funding for taking on apprentices is widely available, almost half of the manufacturing firms surveyed believe they are not eligible for any grants. What’s more, of those businesses which believe they do have access to grants, just 20% are planning to take advantage of them with the rest saying the red tape involved puts them off applying.

“Figures for Research and Development investment are also showing signs of improvement with around 35% planning to spend between 1-2% of their turnover on Research and Development. Those spending over 3% of turnover on R&D also indicated that an immediate credit from Government for R&D expenditure would encourage around three quarters of them to invest even more in this area.

“Unsurprisingly almost 50% of businesses surveyed say they are concerned that the continuing Eurozone crisis will have a negative impact on the economy this year. This is a vital factor to success as the Eurozone remains an export location for almost 90% of the businesses surveyed who currently export. The survey also highlighted that despite competition from low-cost producers, Asia was identified as a key export location, marginally coming ahead of North America. However there were seen to be a number of barriers to exporting in Asia with ‘sourcing and understanding local partners’ as the main problem followed by regulatory issues in export locations.

“Pricing and costs also emerge as a contentious issue within the report. While 61% of respondents believe that ongoing price increases within the supply chain can be passed on to their customers, 39% feel they are unable to do so. When it comes to absorbing the price increases of raw materials, improved productivity is key, cited by 86% of businesses. Sourcing via new suppliers and implementing cost savings were the other key routes to managing growing costs.”

Among those taking part in the survey was H T Brigham and Company Limited, pressworkers in ferrous and non ferrous metals based in Coleshill near Birmingham. The company employs 33 people and operates primarily in automotive, industrial, medical and gas sectors throughout the UK, Europe and North America.

The company’s managing director Barry Smith identifies the European economic crisis and the consequential effect on the availability of finance as his biggest challenge this year. He believes the route to success is to capitalise on the contracts the company has won in recent months as well as continuing to strengthen historical customer relationships. New contracts include work in North America to convert a problematic casting into a metal pressing and producing a metal pressing for the energy recovery sector. The company is also continuing to conduct development work into the secondary generation of fuel cells.

MHA chairman Mike Brown believes the survey shows very clearly that confidence for growth in manufacturing is improving with the sector looking at new and innovative ways to manage uncertainty in the Eurozone as well as rising production costs.

He comments: “Within the UK economy, more guidance and support at the highest level is necessary to ensure growth for this vital sector. We know the Government has expressed a commitment to rebalancing the role of manufacturing in terms of contributing to GDP, but this survey shows immediate and extensive action is necessary to deliver this. We would urge the Government to consider a wider national manufacturing strategy and increased awareness in the support currently available to support the sector and ensure it maintains its place as a leading player in the global economy.”

For a copy of MHA’s Manufacturing Survey, contact hannah.fish@mhllp.co.uk

Photo: Chris Barlow, director at Bloomer Heaven