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Manufacturing SMEs predicting future growth

Manufacturing SMEs in England are predicting an increase in sales over the next six months according to the latest Manufacturing Advisory Service (MAS) Barometer.

55% of the 607 companies questioned expect to grow between October and March 2013, with 41% of firms set to boost investment in plant and machinery. There was also a moderate increase in those planning to spend on new technology (38%).

This cautious optimism comes after a slight softening in the marketplace that has seen the number of businesses reporting increased sales drop to just 45%, down nearly 8% against the previous survey.

As part of the Special Focus, the Barometer also aimed to find out what sectors SMEs are selling into, with the findings showing materials/general engineering as the most popular (42%), closely followed by automotive (39%) and defence (35%).

When asked about future sales growth to 2016, aerospace, marine, off shore wind and rail appear to be attractive propositions for companies looking to increase moderate sales to a significant level.

Lorraine Holmes, Area Director for the Manufacturing Advisory Service (MAS), commented: “It’s reassuring to see more SMEs are expecting to increase their sales going forward and this despite a slight fall over the last six months. “Manufacturers have been reporting fluctuating demand and softening in certain sectors so to see the renewed optimism suggests many believe these markets are coming back on stream.”

She continued: “86% of companies told us that they intend to maintain or increase their workforce, which shows a general stability in these figures.”

Business Minister Michael Fallon said: “It’s encouraging to hear of the optimism amongst manufacturing SMEs in this Barometer. Of course, these are still challenging times, but the recent GDP output is the latest sign yet that the wider economy is starting to recover.

“We will continue to support manufacturers through MAS to ensure they are best placed to take advantage of opportunities to grow.”

This is the third National Barometer conducted by MAS and provides a snapshot of trends in English manufacturing SMEs from July to September 2012, as well as an overview of economic conditions and issues faced by the sector.

A key focus this time was the barriers to growth for companies entering specific industries. Companies said that market knowledge was the biggest challenge to entering seven of the twelve sectors listed (aerospace, chemical, electronics, marine, off shore wind, pharmaceutical and rail), with material costs the major concern for firms looking to get involved in food and materials/engineering.

Regulation, unsurprisingly, is the pressing issue for defence and nuclear, while 21% of respondents said production costs were the barrier to entry in securing automotive sales.

“26% of the companies we questioned classed themselves as advanced manufacturers and there is a definite trend suggesting that SMEs are generally adding more value by converting material,” explained Lorraine. “I don’t think anyone will be surprised that market knowledge was the biggest barrier for firms across seven sectors as this can be difficult information to access and interpret.

“MAS can help with this as we have a number of sector specialists who will be able to provide valuable insight and the right contacts to help SMEs get started in new markets.”

Geco Industries - one of the companies featured in the Barometer – is expecting to grow over the next six months after securing an exclusive sales agreement with a major retailer.

The Sheffield-based company harnesses the powers of bio-ethanol to manufacture ‘Fuel 4’, an environmentally friendly fuel gel that is safer, cleaner and easy to carry than conventional alternatives.

It is proving extremely popular with festival goers, fishing enthusiasts and campers, with Go Outdoors now selling it across its UK stores.

“We’re only into our second year, but are already set to turnover £600,000, 50% of which is exported direct to South Africa,” explained Lewis Bowen, who started the business after completing his Business Degree at Sheffield Hallam University.

“Securing a retail deal is a major step forward for us, but it didn’t just fall into our laps. We listened to what we were being told and developed a range of products around the ‘Fuel 4’ concept called the X Series. This basically forms a one-stop eco-cooking set.”

He continued: “We’ve invested about £70,000 into the tooling and everything is manufactured and assembled within 30 miles of our factory. Going forward, I’d expect us to break the £1m barrier in the next year and take on more staff to boost the existing 8-strong team.”

MAS, which is funded by the Department for Business, Innovation and Skills (BIS), works for manufacturers and through experienced advisors can help shape strategy, create new products, reduce waste and review supply chains.

Companies can take advantage of a free review that identifies key priority areas and funding is available for improvement projects focused on increasing efficiency, developing new products, strengthening supply chains and boosting sales.

This was posted in Bdaily's Members' News section by Russ Cockburn .