Manufacturing companies more upbeat about 2022
Manufacturing companies are feeling more upbeat about 2022 than might be expected after a challenging couple of years, according to the Manufacturing Outlook Report 2021-2022 published by national audit, tax, advisory and risk firm Crowe.
Johnathan Dudley, partner and national head of manufacturing at Crowe, who is based in the Midlands office at Oldbury, said: “2021 was a year when so much challenged the manufacturing sector, as our survey results reveal.
“It was a year of shortages, inflated costs, demand outstripping the ability to supply and the growing realisation that at some point there will be a real stretch on working capital funding requirements.”
The report reveals that in the run-up to the end of the year, demand drove both inflation and economic growth, as evidenced by the ONS statistics.
Of those surveyed, 74 per cent of manufacturers expect turnover to grow in the next 12 months, 92 per cent feel that the profitability of their business has been affected by the cost and/or availability of raw materials and 82 per cent have trouble recruiting skilled employees.
Also 30 per cent say their main barrier to growth over the next 12 months is recruiting or retaining staff, and 90 per cent believe the apprenticeship levy is not effective.
While 82 per cent do not believe the Government’s incentives are effective in promoting exporting, 60 per cent believe the Government measures to get business back on track after Covid-19 are adequate.
Turnover growth expectations among manufacturing companies were generally positive, noticeably more so than 2019 or 2020, despite 92 per cent or respondents saying that profits have been affected by the price and availability of raw materials.
The report highlights that recruiting and retaining staff with the right skillsets will be even more important this year as growth accelerates.
It also demonstrates a significant reduction in the influence of Brexit and trading tariffs, with the the number of respondents seeing this as a barrier more than halving in 2021.
2021 covered a period where trading arrangements with the EU carried a number of interim measures designed to reduce friction, many of which expired on January 1.
Mr Dudley said: “The full impact of the UK’s exit from the EU will only likely be felt as the interim arrangements end and trade agreements are finally put in place with various global trading partners.”
The results of this report come as no surprise to Stephen Morley, president of the West Bromwich-based Confederation of British Metalforming, who partnered with Crowe on the report.
“Having worked very closely with our members over the past two years, the findings reflect what we’ve been seeing ‘at the coalface’ of manufacturing. While we welcome the optimism of 74 per cent of companies, I must put a note of caution against it.
“Supply chain issues are still a major concern and in particular semiconductors, with this likely to persist throughout the year. We’ve also seen shortages across several commodities and increased costs and delays of all goods coming into the UK.
“Thirdly, as we all know, turnover doesn’t necessarily mean more profit or indeed improved cashflow. This is reflected clearly with 92 per cent identifying that the profitability of their business has been affected by the cost of raw materials.
“Despite 60 per cent of companies stating that they believe Government measures are adequate to get business back on track, we at CBM don’t share this optimism and strongly believe more needs to be done to support manufacturing, especially in terms of cashflow and capital investment – two areas we’ve been actively lobbying for support."
