How to survive in manufacturing

There are five things that manufacturers can do to cement their future, says MHA chairman Mike Brown.

by Mike Brown
Last Updated: 06 Nov 2012

The manufacturing sector has had a tough old time of it over the last five years. Now, we're seeing a mighty return to form for many British manufacturers, but it's not enough to hope that the prevailing winds will sweep you to success. At MHA, the accountancy and business advice firm, we launched some research into the growth prospects for manufacturers and the challenges they face. This report found that over a third of the 145 manufacturers surveyed predict growth of over 10% in 2012. But 90% are worried about the government's lack of manufacturing strategy.

With that in mind, here are five strategic steps that firms can take to stay competitive and achieve their expansion hopes.

1)    Explore new horizons

Manufacturing firms in the UK remain overwhelmingly reliant on the Eurozone; it is cited as an export location for almost 90% of the businesses surveyed currently exporting. 50% of businesses surveyed are concerned the continuing Eurozone crisis will have a negative impact on the economy. We would urge customers to think further afield. Despite competition from low-cost producers, we’re seeing high-growth markets like Asia emerging as a key export location, as well as North America.

2)    Find the knowledge

With manufacturing exports, sourcing and understanding local partners is often cited as a key barrier, together with regulatory issues in export locations. Taking the time to investigate these and get closer to the opportunities – and threats – in your target markets can make all the difference.

3)    Plan for tomorrow

As we edge towards recovery, now is the time to look at building the bedrock for future growth. Your competitors are. Nearly 50% of the businesses surveyed plan to increase capital expenditure this year. Really understanding the funding available to you can help your business avoid falling behind. Again, almost half of the manufacturing firms we spoke to as part of the research believe they are not eligible for any grants. Where businesses do believe they have access, just 20% are currently planning to take advantage of them.  A grant could be the difference between sinking or swimming. Understand your options, find out how to access them and take critical steps to securing your business’ future.

4)    Build your talent pool

We hear a lot about youth unemployment and yet manufacturing is experiencing a skills gap that threatens the sector’s wider competitiveness.  As an industry we are in a position to lead on our commitment to developing a talented workforce for tomorrow, with 60% of manufacturing businesses planning to take on apprentices or trainees in 2012. This offers a cost-effective yet valuable way of resourcing a committed and competent workforce. This is about safeguarding and developing skills, building capability in your business and what GE currently refers to as "human innovation.

5)    Innovate, innovate, innovate

Building a strong core of innovation is vital to the future of your business and the industry as a whole. Our research showed that a quarter of respondents have no plans for any R&D spend in 2012. Of the rest, around 35% are planning to spend between 1-2% of their turnover on R&D. This is not good enough. According to GE Capital's latest SME Capex Barometer, one in six UK SMEs missed out on revenues last year due to outdated equipment - an average loss of over £9.2k per SME, or nearly £9.3bn in total, UK-wide.

While the effects of the recession have clearly put pressure on investment, like R&D spend, manufacturing businesses must focus on the significant benefits of long term competitiveness and in the shorter term, tax credits in this area. Reduced investment at this key point could threaten competitiveness in the longer term.

It's not enough just to survive. UK manufacturing needs to improve its ranking in the global market and become one of the leading players. Let's start now.

To see a full copy of MHA’s Manufacturing Survey please contact Hannah.fish@mhllp.co.uk

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