Audit, tax, advisory and risk firm Crowe has provided a snapshot of the UK manufacturing market with the results of its Manufacturing Outlook Report 2024, examining how the UK government can best support the sector.
Johnathan Dudley, Partner and National Head of Manufacturing at Crowe, said: “With over half the world’s population voting for future governments this year, the manufacturing sector’s attention has been focussed on areas that can be directly influenced and transformed with the right policy support and intervention.”
During a period of high inflation, political changes, and continued strained supply chains, Crowe’s analysis – conducted in partnership with the Confederation of British Metalforming (CBM) – looks at the key issues impacting manufacturers. Read the full report here.
Key findings from nearly 90 respondents, include:
- A vast majority – 87% – of manufacturers are unhappy with the government support currently provided to the sector
- 45% view current global turbulence and economic conditions as barriers to growth
- Nearly 7 in 10 manufacturers expecting a growth in sales this year
- 70% invested in carbon neutral initiatives last year, a third increase on 2023
- 70% have increased wages for workers in line with inflation
- 71% believe that industry 4.0 technology will have a significant effect on the sector
- Only 5% of respondents cite energy as a barrier to growth, down a fifth on 2023
Crowe’s analysis shows that the effect of global conditions, including geopolitical tension and conflict, global and national inflationary pressures, and political turbulence, are having an increasing impact on the sector. It’s fair to aggregate these concerns with the Brexit and trading tariff results, with more than half of respondents stating they have a significant concern around supply chain uncertainty.
However, even with these considerations, there is evidently a spirit of business flexibility and “knuckling down” in the face of global and national political issues, with 68% of respondents to the survey expecting turnover to grow over the next year – a testament to the resilience of the sector.
Barriers to growth
The demand for investment and willingness to invest in manufacturing were significant considerations for respondents.
The survey results show that use of own cash resources has predominantly funded businesses this year, correlating to what has been seen in the market with limited short-term demand for capital investment finance.
Mr Dudley said: “There is a clear reluctance to invest and borrow, and with funding from the government reducing as COVID-19 loans start to pay down, there is a real need for government intervention.”
“Reshoring and near shoring should be back on the agenda, as access to raw materials, expertise, and the necessary funding to capitalise on the opportunities at hand are essential.
“For example, at present, the UK is incredibly efficient at recycling steel scrap, but only 25% of it is processed and retained in the UK for supply, while the rest is exported. Local sourcing and greater control of supply chains is clearly necessary.
2024 Outlook
Interestingly, there has been a reduction in concerns over energy costs (only 5% of respondents cite it as a worry), largely due to increased investment in decarbonisation, with 70% of respondents investing in carbon neutral initiatives, in tandem with falling prices compared to the year before.
What is encouraging is the UK’s status as a world leader in renewable energy production and the growing investment in decarbonisation. However, this is only possible through government funding into new technologies in manufacturing, aerospace and automotive. Strategic allocation of this investment into UK manufacturing is crucial.
There is evidently also an increasing realisation that digitisation is the way forward, with more respondents than 70% – an increase of nearly 20% on 2023 – of respondents believing that new technology will replace traditional manufacturing methods.
Mr Dudley added: “Large numbers have been thrown around by politicians in terms of support for manufacturers, but the proof will be whether this is actually spent on what the sector needs, as evidenced in this report.
“Businesses in this sector face many challenges, from financing to recruitment, but a looming election offers some hope. I’d like to see greater support for UK businesses, and a reduction of regulatory barriers for manufacturers in recognition of the vital role they play in the UK economy.
“The UK has a rich history in manufacturing. For this to continue, it is high time that a dedicated Minister for Manufacturing was established to unlock the sector’s potential and allow the UK to revive its position as a global manufacturing hub.
“Determining a long-term strategy, a Minister for Manufacturing can light the fuse of a new industrial revolution in the UK by aligning innovation, economic development, education and support nearly a million green jobs to help get this country making, building and adding value again.”
Stephen Morley, CBM President, said: “Manufacturing should be a priority for this UK government and the next. The challenges of 2024 present a great opportunity for the sector, with the UK government prioritising economic growth to pay the bills.
“The scene is set for manufacturing to drive UK growth and play a larger part in the UK economy’s GDP. We need significant investment and government support, focussing on an Industrial Strategy including a Minister for Manufacturing.”
