Heavy Metal and Electronica can still produce big UK hits

November 11, 2021

UK manufacturing is by no means dead – it’s just different these days.

Before Brexit, Covid and driver shortages, the sector faced fierce competition from emerging economies in Asia, primarily China and India, which are clearly able to produce goods more cheaply. Manufacturing’s share of the economy is around 10% today, half of what it was in 1990.

Nonetheless, engineering and manufacturing are sectors undergoing dramatic change, which can also bring significant opportunities for UK businesses ready to exploit well-established strengths in electronics, chemicals, pharmaceuticals and aerospace. The industry is no longer about merely turning raw materials into physical products. Increasingly, manufacturers derive revenues from other activities which are really services, for example specialist engineering, retooling used parts or even some forms of equipment leasing.

The value chain is increasingly complex and manufacturers are adapting, some quicker than others. In addition, technology in production – robotics, computer design and new materials – require fewer jobs, meaning new forms of training and a need for companies, the education sector and government to work together delivering them.

Looking specifically at the supply chain, Brexit and the availability of raw materials are only part of the issue at present, and driverless trucks are by no means the remaining factor. The single biggest element of supply chain disruption is  a much wider staff shortage, based on a skills gap which continues to hamper businesses needing to compete by developing next-generation products. It’s difficult for managers to build resilience into their operations when attracting and retaining the best people is such a struggle, often with spiralling costs.

So much seems to be beyond the control of manufacturing and engineering businesses, whether they are early stage enterprises or large, established companies trading beyond the UK.  However, a number of areas remain on which managers may still focus to keep their businesses in the game: cash flow and working capital; leasing and funding of production lines; asset finance; factory premises and their purchase or rent; financial support for R&D; managing exchange rate fluctuation; operational efficiency; and invoice financing.

These are all areas we, at Buchler Phillips, specialize in and are happy to discuss with directors and stakeholders in an initial, no obligation consultation.

The long term picture is encouraging.  Almost 75% of R&D spend in recent years has been from manufacturers and engineers, so optimists might say that these sectors are at the heart of a major realignment. Rumours of their deaths are greatly exaggerated.

Written by Paul Davis, Partner at Buchler Phillips, the UK’s leading independent corporate recovery, restructuring and turnaround firm.

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