Small to medium-sized manufacturers (SMEs) must improve productivity by unlocking ‘their own hidden potential’ if sales and profits growth are to meet expectations – according to the latest National Manufacturing Barometer.
The quarterly survey, which is conducted by SWMAS (part of Exelin Group) in partnership with Economic Growth Solutions (EGS), invited 320 manufacturing industry leaders to discuss performance, with a special focus on productivity and the extent to which it is engrained in manufacturing business culture.
An overwhelming majority of respondents (72 per cent) said they anticipate an increase in sales in the next six months – the highest figure recorded for nearly three years. In a further indication of confidence in the sector, 59 per cent of respondents said they were expecting increased profits over the next six months.
However, as only 45 per cent of manufacturers actually experienced an increase profits in the second half of 2017, the gap between anticipated sales growth and actual recent improvements in profits continues to raise questions about productivity, especially the ability of manufacturers to meet their own growth targets.
Encouragingly, more than half (56 per cent) of manufacturers indicated in the Barometer that they aimed to deliver against their growth targets by investing in machinery and premises; a rise of 13 per cent on the last report.
Furthermore, 48 per cent of respondents to the latest survey said they planned to recruit new staff, which is only two per cent higher than the same time last year. This suggests that improving productivity through the existing workforce and facilities remains the key focus.
The latest Manufacturing Barometer survey also explored the extent to which manufacturers have integrated productivity into their business and workplace culture.
Around 70 per cent are confident that productivity is engrained at a strategic level, and championed by business leaders. However, almost half indicated they would like to achieve better, and sustainable, productivity improvements, pointing to the need to improve engagement with staff to deliver and sustain change.
Simon Howes, CEO of Exelin Group, said: “Confidence levels are riding high in the manufacturing sector despite market uncertainties, demonstrating the strength and resilience of our SME manufacturers.
“The Barometer does, however, illustrate there is a definite gap between many manufacturers’ expectations about future performance and their ability to deliver the productivity gains required to drive sales and profit growth.
“Our special focus on productivity and culture suggests that while many firms have successfully embedded productivity good practice at a strategic, leadership and management level, there remains a stumbling block in actually delivering lasting productivity improvements. In short, manufacturers have to look harder at how they engage their workforce to unlock their own hidden potential – and so achieve their sales and profit ambitions in the process.”
Dean Barnes, regional director of Economic Growth Solutions and the Manufacturing Growth Programme, added: “This Barometer delved deeper into how manufacturers are tackling the productivity puzzle and it’s hugely positive to see that more respondents are planning to invest in machinery and premises, and around half are committed to recruiting staff.
“However, with well over two thirds of manufacturers reporting expected sales growth, it’s clear that unlocking the full potential of the existing workforce remains key to sustainable productivity gains. It is of paramount importance that businesses are able to access specialist help and advice to grow and improve, and fully realise this potential.”
Michael Gibbs, managing director of Redruth-based spring manufacturer European Springs & Pressings, said: “These findings speak volumes. To have two thirds of UK SME’s forecasting continual growth in their order books – alongside increasing profits – confirms the UK’s recent rise up the rankings to the eighth largest manufacturer in the world.
“It’s encouraging to see the sector also focuses on efficiencies through management and lean manufacturing processes to counter external price rises. We’re now heavily investing in new premises, personnel, machinery and efficiency systems in a determined bid to see today’s manufacturing trend continue.”
Peter Bruch, managing director of Birmingham-based precision components manufacturer AE Aerospace, concluded: “We have focused on productivity improvements since our Management Buy-Out four years ago. The biggest difference has been the investment in our people and systems, the team understand what work they need to do, why and how it benefits them to improve what we do.”
The Manufacturing Barometer is the largest survey conducted of SME manufacturers in the UK and asks senior decision makers for their views on factors influencing business performance and the future of the sector.
This survey covers the business operating period for winter 2017 (October, November and December 2017) with businesses surveyed in January 2018. UK SME Manufacturers wanting to add their voice can sign up to contribute to the next Manufacturing Barometer at www.swmas.co.uk/knowledge/manufacturing-barometer.