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87% of manufacturers unhappy with lack of government support

19-Apr-2024 - Last updated on 18-Apr-2024 at 16:52 GMT

Survey finds manufacturers are disappointed with UK Government's sector support. Credit: Getty/erhui1979

With more than half the world’s population voting for future governments this year, the manufacturing sector's hopes are set on those which can be influenced or improved by the right policy.

Almost half of manufacturers are significantly concerned around supply chain uncertainty, a report from audit, tax, advisory and risk firm, Crowe, has found.

Global turbulence and economic conditions have been flagged as major barriers to growth, with 87% of respondents adding that they are displeased with the current level of support offered to their industry by the government.

Despite this, there is evidently a spirit of business flexibility and 'knuckling down', with 86% of manufacturers saying they anticipate turnover to grow over the next year.

Local sourcing back on the agenda

The results of Crowe's 2024 Manufacturing Outlook Report show that use of own cash resources has been the main source of business funding this year, correlating to what has been seen in the market with limited short-term demand for capital investment finance.

“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,” Johnathan Dudley, partner and national head of manufacturing at Crowe said.

He continued: “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.”

Other research conducted by Software Advice garnered similar results in a survey of 200 supply chain and logistics professionals, with 69% of UK supply chain companies saying they intend to switch all or most of their suppliers to ones closer to home this year.

While localisation may ease economic-related woes, it does not entirely resolve the issue. According to the survey, economic inflation (39%) and the recession (36%) were the most frequently cited concerns among supply chain professionals, with a further 27% expressing concerns over a lack of skilled workers in the industry.

Although staff shortages have been frequently reported as an underlying problem across most sectors in recent years due to global factors, small retailers and logistics firms could be hit particularly hard as they struggle to compete with larger companies offering more attractive salaries and employee benefits.

The data found that among the 200 midsize companies surveyed, as many as 33% are struggling to attract or retain employees with skills in logistics distribution, data analytics, and quality control.

Could technology be our saving grace?

Both surveys found that digitalisation is increasingly being acknowledged as ‘the way forward’ in the face of today’s tough environment.

In Software Advice’s findings, 42% of respondents said they have allocated between 6% and 10% of their total 2024 company budget to supply chain technology, and a further 8% said they will spend even more than that.

More specifically, most companies are prioritising investments in AI (47%), advanced cybersecurity (42%), and advanced data analytics (41%) to help optimise their supply chain management.

“Skills shortages in areas such as data analytics and customer service can be filled to a degree by technological solutions, with AI showing particular promise among surveyed professionals. The priorities of supply chain companies in their tech spend underlines this goal, however, upskilling the existing workforce also needs to remain a target for businesses to fill knowledge gaps,” commented UK analyst at Software Advice, David Jani.

Meanwhile, Crowe’s report revealed that more than 70% - an almost 20% rise from 2023 – of its respondents believe new tech will replace traditional manufacturing systems.

Energy concerns wane

Whilst labour shortages and economic uncertainty continue to weigh down on many manufacturers' minds, concerns over energy prices have tempered.

According to Crowe, just 5% of survey respondents cite this as a worry – likely 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.

Although it’s encouraging to see growing investment into decarbonisation in the UK, Crowe points out that this has only been possible as a result of government funding; and the future of UK manufacturing will be heavily dependent on where the money is placed next.

The proof is the pudding

“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,” Dudley continued.

Looking ahead with cautious optimism, he added: “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.”

Minister for manufacturing needed

With the UK’s rich history in manufacturing and food its biggest manufacturing industry, there have been previous calls for a minister dedicated to manufacturing – an idea which Crowe is bringing back to the fore following its recent findings.

“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,” Dudley affirmed.