Brexit challenges threaten to slow South West manufacturing’s comeback, reveals latest Barometer

Brexit issues are causing small to medium-sized (SME) manufacturers in the South West significant disruption as they look to recover from the economic effects of COVID-19.

The latest South West Manufacturing Barometer, which is produced by SWMAS, reveals 61% of companies have seen negative price changes within their supply chain since leaving the EU, with the availability of raw materials an issue for 52% of firms.

More than half of regional respondents cited complications with importing goods (53%), whilst 43% found exporting products more difficult since December 31st.

This survey also highlighted that less than two fifths of SME manufacturers feel they are getting the right support and guidance from the Government on how to navigate changes caused by Brexit, underlining the need for better communication and additional tailored support.

On a more positive note, businesses in the South West appear to be more optimistic about the future than their national counterparts.

Data shows that 42% of regional manufacturers have increased sales in the last six months, with half expecting further growth between now and the Summer, compared to 31% and 44% nationally.

That said, only 15% of senior business leaders responding to the survey expect increasing sales as a result of the Brexit deal, indicating that future growth predictions are based on their own actions and an improving COVID-19 situation.

“South West manufacturers have had to deal with unprecedented levels of change over the past 12 months and it is encouraging to see the manufacturers in the region having the confidence to look forward to the future positively based on the way they have adapted and changed throughout this difficult time,” explained Nick Golding, Managing Director of SWMAS.

“However, despite signs of an initial recovery, firms have a new set of issues to contend with now the Brexit deal is done. Price hikes in the supply chain have been immediate, and we are hearing tales of lead times being extended on raw materials.

“Over half of respondents aren’t convinced that the Brexit guidance they have already received from the government is adequate. SMEs are asking for more clarity on key issues, such as product markings and CE replacement (54%), sourcing components/services overseas and logistics or freight forwarding (both 49%). These challenges need to be addressed and quickly.”

He continued: “Reshoring has been spoken about as a potential opportunity and there is some confidence from manufacturers that new purchasing trends might drive increased

sales to the UK. We would love to see more made of this and perhaps even a co-ordinated campaign to promote the benefits of locating production back home.”

Optimistic Picture

Away from Brexit struggles, the latest Manufacturing Barometer paints a more optimistic picture of industry in the South West bouncing back from COVID-19 in comparison to the metrics in the national report.

All key performance data for companies have seen positive moves since the last report, with future sales, profits, employment prospects, and investment all moving in the right direction.

“Over 40% are planning to take on staff going forward, whilst 43% are planning to spend more on new machinery and capacity to remain competitive in a challenging environment,” added Nick.

“Encouragingly, this report indicates that some companies feel these actions could be sufficient to help them survive and thrive over the coming months. It is reassuring to see that confidence appears to be slowly improving despite ongoing challenges, with the number of businesses expecting growth in future sales gradually returning to pre-pandemic levels, albeit on substantially lower expectations.”

He concluded: “We hope that further support for the manufacturing sector will help avoid more disruption, safeguard job and maintain future investment ambitions as businesses are still being asked to invest in new safeguarding measures for COVID-19 and the costs of complying with new standards and regulations resulting from exiting the EU.”

The Manufacturing Barometer covers trading activity in October, November and December, with responses taking place in January 2021.