Health of the Manufacturing and Engineering sector

For a number of years we have worked with Lloyds Bank, through our partnership with MHA, to look at the health of the manufacturing and engineering sector nationally and across the region, and to forecast what the future may hold.

We speak to businesses to put together a snapshot of the trends and challenges the sector is facing. This year’s results show that, nationally, skills shortages remain a major concern to businesses with 20% of firms saying that they either have lost, or are at risk of losing staff as a direct result of Brexit, mainly due to the uncertainty over workers’ rights.

Here in the South West we’ve seen positive economic development in the past year, with 66% of respondents reporting growth – and 27% reporting very encouraging growth levels of 10% or more.

Optimism levels remain high as well, with 80% of businesses anticipating revenue growth in the coming year from increased demand and the expansion of their product ranges – even with ongoing concerns over Brexit.

Research and Development expenditure lags behind the national survey averages with only 29% - compared to 47% nationally - investing between 1% and 6% of their turnover on the next generation of products and process. Only 13% of businesses in our area report that they do not invest anything in R&D, but there is definitely work to be done in raising awareness of the R&D tax credit regime, as 44% of businesses have not made a claim in the last 12 months. This was also reflected in the level of businesses who knew about or had accessed other grants or government funding available to them, with only 25% doing so.

Short and longer term, business confidence remains high and in line with national trends, but getting the right skills continue to represent a barrier to growth for 30% of business.

Similar to the national picture, the skills agenda remains a priority for businesses in our region, with 63% reporting that they plan to increase staff numbers, which is 6% above the national indicator. Locally 10% of businesses expect to lose staff because of Brexit, giving us a more optimistic outlook than the national picture.

Recruiting staff with relevant skills remains an issue, with experienced engineers, skilled machinists / technicians and production staff continuing to be the most difficult to find. A lack of local motivated lower skilled candidates has also arisen as a consistent regional and national issue.

Encouragingly, 60% of local respondents are planning to take on apprentices, which is following national trends.

Overall, respondents in our region face similar issues to the national picture, where optimism remains high but is tempered by concerns over Brexit.