Views of the small manufacturing and engineering business owner

Close Brothers Asset Finance surveys around 1,000 small and medium-sized business owners three times a year across our key sectors, asking them a variety of questions. In this article, we take a close look at the views of those firms in the Manufacturing and Engineering sector. Where appropriate, the UK average will be included to provide high-level context.

FINANCE

• On average, 80% (UK: 73%) of Manufacturing and Engineering SMEs plan to seek funding for business investment in the next 12 months.
• 47% (UK: 43%) of Manufacturing and Engineering SMEs are confident the economy will grow in the coming 12 months, against 45% (UK: 46%) who expect a further slowdown of economic activity. The rest anticipate no change.
• 35% (UK: 36%) of Manufacturing and Engineering firms expect to grow in the coming year; 54% (UK: 54%) will tread water while 9% (UK: 9%) will contract.
• The top five concerns for Manufacturing and Engineering businesses are:

1. Energy costs
2. Inflation
3. Interest rates
4. Material supply
5. Cash flow

• Manufacturing and Engineering firms’ main business priorities at the moment are:

1. Achieving growth: 36%
2. Developing products/services: 17%
3. Business consolidation: 15%
4. Survival: 11%
5. Investing in staff: 11%
6. Paying down debts: 8%

• Late payments are an issue for 56% (UK: 51%) of M&E firms

INFLATION

• 53% (UK: 48%) of M&E SMEs think inflation has peaked; 35% say ‘no’ with the rest unsure 
• The four biggest impacts of inflation are:

1. Raising prices and passing them on to customers
2. Increased wages to support employees
3. A negative impact on cash flow
4. Some businesses have chosen to absorb cost increases rather than pass them on to customers.

• 42% (UK: 40%) of M&E SMEs think the Bank of England’s aim to get inflation below 5% by the end of the year is realistic; 45% don’t agree, and the rest are unsure
• 48% (UK: 46%) of M&E firms have experienced lower demand for their products & services because of higher inflation against 36% (UK: 32%) who have seen an uplift; the rest have felt no impact

COST OF BORROWING

• 54% (UK: 53%) have seen an increase in their cost of borrowing; 37% (UK: 38%) haven’t, and the rest are unsure.
• 45% (UK: 36%) of SMEs have switched funders because of increased interest rates.
• 57% (UK: 51%) have considered alternative forms of finance because of increased interest rates.
• 42% (UK: 39%) think interest rate rises have peaked while 42% (UK: 45%) do not.
• 62% (UK: 59%) have had to increase their prices to cover the increased cost of borrowing.

INSOLVENCIES

• 63% (UK: 55%) of M&E SMEs are concerned about rising company insolvencies in their supply chain
• The 5 most popular measures firms are taking to ensure their firm remains solvent are:

1. Cutting costs
2.  Improving efficiency
3. Seeking new funding
4. Taking out insurance
5. Considering refinancing their assets

• 45% (UK: 43%) of M&E firms have seen a rise in mergers & acquisitions in their sector over the past 12 months

For more industry insights, please visit closeassetfinance.co.uk/manufacturing