Manufacturing sector faces continued funding pressure despite growth in demand, Fresh Thinking Advisory warns

Fresh concerns have been raised that UK manufacturing businesses are unable to access the funding they need to grow, as up to 43 per cent of SMEs indicated they will need to borrow further ‘simply to survive’ in 2023.
Michael Crossland
By Michael Crossland
Published 2nd May 2023, 16:45 BST

The warnings, from Fresh Thinking Advisory, come as the UK manufacturing sector demonstrated its long-term resilience in the first quarter of the year as local and international markets began to recover, helping firms combat a period that saw the highest monthly input cost inflation since records began in 1985.

Commenting on the sector, Oliver Reece, managing director of Fresh Thinking Advisory, said: " The positive momentum the manufacturing sector is seeing will put pressure on funding lines just when businesses think they are starting to see the light at the end of the tunnel.

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“In recent years, many UK manufacturers have faced a number of challenges related to access to finance, including a lack of available lending from traditional sources such as banks and other financial institutions. As the sector begins to rebound, it needs funding to invest in working capital and take advantage of the growth in orders, particularly where both input and output prices have increased, which combined with supply delays, has increased the working capital cycle materially."

Oliver Reece, managing director of Fresh Thinking Advisory.Oliver Reece, managing director of Fresh Thinking Advisory.
Oliver Reece, managing director of Fresh Thinking Advisory.

Many manufacturing businesses have taken on large amounts of debt in order to survive, and according to a poll by accountants RSM, 65 per cen of businesses claimed that a shortage of cash had prevented them from achieving their growth goals.

Bank loans to SMEs also fell by £14 billion in the year to Feb 2023.

Monthly input cost inflation of up to 24.5 per cent in 2022 is now also beginning to be balanced with higher sales prices, with improving activity levels in 2023 leading MAKE UK to conclude that margins will stabilise over the next 3 months and even begin to rise slightly in the sector for the first time since the second half of 2021.

Related topics:SMEs