Manufacturing leaders call for urgent support

3 mins read

Over half (55%) of UK manufacturing businesses say that the government’s COVID-19 support measures are inadequate with further funding for the sector urgently needed, according to Crowe’s Manufacturing Outlook Report 2021.

When asked whether the extension of COVID-19 schemes – including Coronavirus Business Interruption Loan Scheme (CBILS), Bounce Back Loans and annual VAT – was enough or whether more assistance was needed, 31% of respondents said more help was still needed.

While the availability of government secured debt has helped the industry survive through 2020, there is an urgent need for continued finance and investment support to fund growth and improvement in the future.

Apart from Coronavirus Job Retention Scheme (CJRS), the manufacturing sector has not benefitted from grants like other industries, but by a generation and extension of debt - putting the sector into immediate survival mode during 2020. In addition to the need for such debt to be repaid at some point, more pressing concerns abound, as faltering supply chain demand will take time to be restored.

In addition, the Government’s U-turn on the Job Retention Bonus from February 2021 has delivered an additional jolt to the sector, with many businesses facing significant shortfall in the coming months.

While the removal of lockdown in 2021 promises a resurgence in other sectors, this is not so certain in manufacturing sectors, especially where inactivity has removed or reduced demand. This will require a longer ‘run up’ to be restored than other sectors, where there has been more grant-based support.

Johnathan Dudley, Partner and Head of Manufacturing at Crowe (pictured), commented: “The UK manufacturing sector has survived the COVID-19 disruption, not by grants, but by the continued generation and extension of debt. Clearly there was a need to first stabilise businesses, then ‘health check’ them to prepare for a return to what would be a new way of working. However, these latest results paint a clear picture and the message from the industry is clear: existing support levels are inadequate. If supply chains are to be safeguarded, which is essential for removing uncertainty in the short-term, and for providing a growth platform in the longer-term, manufacturing businesses which have for so long been the backbone of the British economy, must not be left behind.

“The Retention Bonus U-turn is proving particularly harmful. In conducting this survey, we heard from businesses who were expecting support reaching up to £400,000. Funds which would have been directed towards growth and investment are now being urgently diverted to keep staff in jobs and the wheels just about turning.

“The nature of manufacturing supply chains heightens the urgency of government action. You are only as strong as your weakest link and it only takes one company to slip for the whole supply chain to come crashing down.

“We urge the government to provide more support the manufacturing industry.”

Stephen Morley, President of the Confederation of British Metalforming added: “These results very much mirror the views of CBM members, which shows the effects have been widespread across all manufacturing sectors.

“There was still some indication of positivity for the future of the sector, which we hope will become reality as the year progresses, with 83% of companies expecting turnover to grow. However, we have to be realistic and say they are working from a very low starting point, mainly down to the effects of the pandemic.”

Lack of effective government support is not the only issue keeping UK manufacturers up at night. Additional results from Crowe’s Manufacturing Outlook report saw 31% of respondents reporting either an attempted or successful cybercrime attack in the last 12 months and 12% of respondents confirming that they had experienced incidents of suspected fraud in the last year.

It is worth noting that these results record just what respondents know to be the case and there may be further instances of fraudulent activity that remains undetected.

Jim Gee, Partner and Head of Forensic Services, said: “Fraudulent activity historically always increases in times of economic hardship and an increased reliance on digital systems will further extend this trait as there is no longer a physical need for a perpetrator to ‘put their hands in the till’.

“‘With the spotlight increasingly coming on supply chain accreditation, it is highly likely that companies will have to prove that they have carried out fraud and cybercrime assessments of their businesses, much in the same way as they have previously sought BS and ISO accreditations.

“Fraud and cybercrime now represent over 40% of all crime in the UK and the financial and reputational risk from falling victim to such crime can be devastating.”