Manufacturing market remains cautious

The UK manufacturing sector is proceeding with caution and is dubious of an early recovery, according to BDO Stoy Hayward.

In a survey covering the aerospace, defence, food, automotive, engineering and technology sectors across the UK, 37.3% of respondents were confident that markets will begin to recover over the next six months, with only 14.7% being negative. 48% of respondents said confidence levels were unchanged from the beginning of the year.

When asked if they expected a decrease in margins, results varied according to geographics, sub-sector and the size of company. Nearly 37% of respondents expect margins to fall and 33% expect them to stay the same over the next 6 months.

Companies with turnover of less than £300m in the engineering, metal products and technology manufacturing were most downbeat, with nearly 48% of engineering and nearly 46% of manufacturing and technology companies expecting margins to slide. In particular, smaller engineering and metals products companies are gloomy in comparison to other sectors.

For both larger businesses (turnover of more than £300m) and smaller businesses (turnover of less than £300m), the most pressing issues were cash flow and sales.

Companies also voiced a number of other concerns, including:
• Inability to insure debts
• Increasing government red tape
• Credit insurance on new foreign accounts
• Avoiding breaching financial covenants set by our bank.
• Strength/weakness of the GBP. The majority of goods are purchased in USD so the weakness of the pound has had a direct impact on our margins.

Tom Lawton, head of manufacturing at BDO Stoy Hayward says: "The numbers overall are more positive than we were expecting, and there are indications that the sector is starting to improve, following an extremely difficult year. Manufacturers are having to work harder than ever to cope with the economic slowdown and issues such as falling sales and cash flow continue to weigh heavily on both large and small companies. It's also interesting to note that a number of companies of all sizes cite government red tape as one of their biggest headaches."

Justin Cunningham

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