More industry support needed, as four fifths of South East SME manufacturers admit furloughing staff

A new report out today is asking Government for further support if manufacturing SMEs in the South East are going to overcome the delay in volumes returning following the impact of Covid-19.

The latest Manufacturing Barometer, the largest survey of SME manufacturers in England, highlighted that 80% of firms in the region took the decision to furlough staff, and almost a third (30%) have already made redundancies as they look to get through the economic shock of the pandemic.

Worryingly, this figure is set to remain the same as the job retention scheme tapers off, with 31% indicating further job losses between now and the end of the year.

Conducted by SWMAS (South West Manufacturing Advisory Service) and the Manufacturing Growth Programme (MGP), the report showed that 37% of companies had accessed Coronavirus Business Interruption Loans, whilst a similar number took advantage of Bounce Back loans.

17% of management teams have already taken additional financial steps to protect their businesses, including personal loans and re-mortgaging commercial or residential properties.

Martin Coats, Managing Director at MGP, commented: “Over half of manufacturers have told us that they are either just surviving or recovering and this, along with the other data, tells us that there is an urgent need for further business support, which the Government could help with.

“Industry is very resilient, but it is very difficult to plan for sales stopping overnight across numerous sectors and then you’ve got the added complications of supply chain interruptions and trying to organise factories that are Covid-19 secure.”

He continued: “The furlough scheme has protected thousands of jobs, but the Government may have to consider additional support until sales and revenues are more consistent or start to reflect levels seen prior to the pandemic.

“VAT payment holidays would be welcomed by 52% of companies, with nearly two fifths suggesting business and financial support to find new customers is required.”

The Manufacturing Barometer, which questioned 54 SME manufacturers in the South East, gave an insight into current trading conditions, with 74% reporting a decrease in sales over the last six months and nearly a quarter (24%) indicating a reduction in capital spend.

There were some grounds for optimism when compared with the results of the previous report though and the first early signs of companies feeling more confident about their future prospects.

43% of companies are predicting an increase in sales over the next six months (11% in the last Barometer), with a similar number expecting a rise in profits going forward.

Martin went on to add: “Manufacturers have tried to use the slowdown in activity as effectively as they can. Many have focused on process improvement to boost efficiency (35%), identifying new customers and suppliers (57%) and, encouragingly, more than two fifths (46%) have chosen to upskill their workers.

“There are still everyday issues they are trying to come to terms with. 61% have had to review cashflow forecasts, 39% have seen production put on hold due to no fault of their own and 28% have had to contend with customers extending payment terms.”

He concluded: “These are all difficult situations and require specialist business support and access to grants/financial help to overcome. That’s why we’re urging the Government to look at ways where they can extend the assistance available to our sector, especially with 37% of manufacturers suggesting that Covid-19 has disrupted their planning for Brexit.”

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