"This uneasiness is palpable across the landscape of British business, as many business owners question the business models they have created"
The manufacturing sector in Britain has long maintained an outstanding reputation, producing some of the world's most recognisable products and vehicles, from the emblem of British car manufacturing, Rolls Royce, to the ingenuity of Dyson and the cutting edge technology of BAE Systems.
This reputation was protected by the adaptability of British industry, the rate of technological adoption, and our skilled workers - keeping us ahead of the pack and differentiating us from cheaper alternatives. However, over the past 30 years we have seen an explosion in globalisation coupled with robotics and automation that has changed the way that manufacturers operate, and as a result, a change in profit margins. Simultaneously, we are seeing a new global wave of populism sweep across politics, leading to more inward thinking trade policies. In the face of vast competition with far greater flexibility in pricing, British manufacturing has had to continuously adapt - and this challenge is no less important today.
Currently, manufacturers seem unsure. They’re asking what will happen to Britain following the proposed departure from the European Union, a question that no one has an answer to. This uneasiness is palpable across the landscape of British business, as many business owners question the business models they have created and their ability to sustain significant change. The protectionist reaction, I’ve witnessed, is the stockpiling of materials and cash in order to stem any revenue slow down they may be experiencing or expecting to experience. This has the converse effect of slowing down business growth and restricting investments that are required to build out business - be it investment in machinery, staff or research and development.
The most recent CBI figures on manufacturing, show that optimism within the industry is slipping, spending on plant machinery, and buildings decreasing, and investment in training and innovation flatlining. The ongoing skills shortage that the UK is enduring is augmenting this, and ultimately creating a perfect storm of complications for businesses to survive. This is forcing manufacturers to tread a careful line, balancing the need to invest in the future, with protectionism over the short-term and uncertainty.
But, not all is dark and gloomy!
The UK is resilient and has a strong standing within the global manufacturing arena. We’ve overcome significant change to thrive in the past and will again. Once a degree of certainty is breathed back into the country, regardless of what that may be, people as well as businesses can begin planning again and ultimately making long-term investment decisions. We foresee an increase in demand post-Brexit, regardless of the outcome as businesses overcome their hesitancy and release funds into their business to drive forward their growth ambitions. The goods manufactured in the UK will not become obsolete, once confidence is restored, purchases and orders will resume.
For this reason, manufacturers need to be aware of the opportunities in accessing finance. The latest British Business Bank - Business Finance report, shows us that awareness of alternatives to traditional finance has continued to grow - equity and asset finance, as well as market-based lending have grown by 4%, 3% and 18% respectively. This finance is providing the much needed capital, for an industry that has been at the forefront of British industry for many generations. Manufacturers have a large range of assets they can leverage such as their stock, invoices, machinery, vehicles and property - releasing cash from these assets may be helpful for businesses trying to balance the books in the face of uncertain demand. A lack of funds should not be a barrier to a business looking to invest in technology, or workforce, that will deliver greater future success.
We work, continuously, with manufacturers, supporting them in understanding what external finance could enable them to achieve, and the threats and opportunities in the current environment. Our aim is to help them enable their growth and continued success, securing the future of some of our country’s long-standing manufacturing businesses.