SME manufacturers concerned about corporate competition

2 mins read

About two-thirds (63%) of SME owners in the manufacturing sector are concerned that multinationals and other large corporates ‘have too much say’ over the future viability of their business, according to research compiled by accountancy firm, Menzies LLP.

In order to address this, about half (46%) of SME manufacturers are intending to boost their own competitiveness by cutting costs and raising finance to re-invest in their businesses and 18% are looking for ways to spread risk. However, about one in four (27%) are not intending to take any action at all, with most commenting that they ‘feel unable to do anything about it’.

63% of respondents in the manufacturing sector believe the prolonged period of Brexit uncertainty has favoured multinationals and other large corporates, allowing them to gain ground over SMEs.

Caroline Milton, partner at accountancy firm, Menzies LLP, said: “Small and medium-sized manufacturers have been suffering in the current climate of uncertainty and many believe large corporates and multinationals have been better able to prepare for Brexit and invest in technologies to give them a competitive advantage.

“Whilst they realise that being smaller and more agile is a bonus, SMEs are concerned that corporates will be more cash-ready to take advantage of any upturn that might come once the Brexit stalemate is resolved one way or the other.”

Harder to make a profit

The cross-sector survey also reveals that 46% of SME owners believe it has become harder to make a profit in the past year, despite most reporting static or improving sales. Whilst Brexit uncertainty was the main reason given for this, one in three (33%) SME owners also blamed ‘more competition from multinationals and other large corporates’.

“SMEs are feeling the heat of competition, and some believe that large customers are holding too many of the cards, which is putting pressure on their cash flow and operating margins. Some also think large corporates have scale, geographic reach and market dominance on their side,” added Caroline Milton.

Challenges facing manufacturers

Commenting on the challenges that lie ahead, SME owners in the manufacturing sector identified their top six challenges as follows:

  • Predicting future demand
  • Cash-flow forecasting
  • Staying focused on customer service delivery
  • Staying up to date with laws and regulations
  • Brexit-related uncertainty
  • Controlling costs

SME advantages and disadvantages

SME owners identified five key advantages that corporates have over them in the current climate as follows: ‘bigger budgets to invest in technology’; ‘better access to credit and finance options’; ‘bigger budgets to attract talented people’ and ‘they can afford to take a long-term view’ and ‘better access to strategic advice’.

Two thirds (63%) of SME owners also know they have some advantages compared to large corporates. The top five were identified as follows: ‘lower operational overheads and fixed costs’; ‘quicker decision-making ability due to a lack of shareholders’; ‘better equipped to react to market changes’; ‘less red tape and compliance risk’ and ‘fewer legacy issues’.