Manufacturing business confidence on the rise

Barometer reveals 12-month high in West Midlands manufacturing SME confidence


Lorraine Holmes, Area Director for the Manufacturing Advisory Service (MAS)

Lorraine Holmes, Area Director for the Manufacturing Advisory Service (MAS)

Growth prospects amongst West Midlands manufacturing SMEs is at a twelve-month high according to the latest Manufacturing Advisory Service (MAS) Barometer, which reveals nearly three quarters (73%) of companies questioned are expecting to increase sales over the next six months.

There was equally positive news on recent performance, with 51% of the 107 firms who responded reporting a rise in sales turnover (+10% on previous quarter), whilst 92% of manufacturers are looking to take on staff or keep workforce levels the same.

When it comes to spending money on the business, 46% are planning to channel it into new technologies and 60% intend to invest in new machinery and premises – this makes the West Midlands the national hotspot for future SME investment.

This overwhelming optimism is present despite ongoing barriers causing SME manufacturers to turn down new opportunities.

In response to the Barometer’s special focus, more than half of firms (57%) quoted poor profit margins as the main issue, followed by an inability to meet lead times (27%) and design specification (24%).

Lorraine Holmes, Area Director for MAS in the North and West, explained: “If you compare findings with the similar period in 2012, you will see that firms are a lot more optimistic, with most key performance responses measured showing positive improvements.

“There appears to be a greater appetite from SMEs for investment in order to remain competitive and I think we are also seeing a desire to create jobs to meet expected demand.”

She went on to add: “The barriers to new opportunities are also interesting. Poor profit margins and lead times both paint a potential picture of unrealistic customer expectations and it appears that manufacturers are favouring a more pragmatic approach to taking work on.

“An inability to meet design specification and issues with equipment capability were also quoted as possible barriers and this could underline the renewed desire for investment in new machinery and technology.”

The second MAS Barometer of 2013 collected responses from over 100 manufacturing SMEs across the region providing an overview of economic conditions and issues faced by the sector from January to March this year.

The quarterly special focus concentrated on identifying barriers preventing companies taking on new orders and the impact this is having on business performance.

Companies said that turnover would increase – on average – by 23% if they could overcome the three main barriers quoted, whilst just under half admitted that new clients accounted for up to 25% of the missed opportunities.

Lorraine continued: “What we are seeing is that West Midlands manufacturers have made massive strides forward in implementing best practice production techniques and can compete with the best in terms of quality, cost and delivery.

“They now need support on longer-term strategies and in developing new products and markets and this is being reflected in the assistance MAS is providing.”

The Rical Group is one company that reflects the optimism shown in the Barometer, with anticipated growth underpinned by an increase in its order pipeline and enquiry levels.

Located across four sites in the Black Country and Birmingham, the company’s ability to supply world class fine blanked, precision pressed and die cast metal components has seen it attract work back into the UK.

“We’ve certainly benefited from the change in focus to re-shoring and, in the last year alone, we have secured a number of contracts that had previously been offshored for manufacture in India and China,” explained Paul Bale, Rical Group’s Chief Operating Officer.

“Customers are increasingly looking at local sourcing to reduce issues around quality and failure to meet demanding lead times. The actual landing cost of a part being produced in the sub-continent is also going up by the day, making the UK a lot more attractive proposition to buyers.”

He continued: “Reassuringly, we are also witnessing a number of long-term projects coming to fruition that had previously been delayed due to the uncertainty of the economy.

“Our sales across the Group are currently at £24.5m and we expect this to increase to £30m with the volume of exciting enquiries we have in the pipeline. This will undoubtedly lead to the creation of local jobs and the development of specific skills, through programmes such as apprenticeships.”