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UK manufacturers want more support to help SMEs to grow

06 December, 2021

Britain’s manufacturers are calling on the Government to improve access to funding for small and medium-sized firms to help them to boost their productivity and to expand. New research published by Make UK, the manufacturers’ organisation, shows that UK economy could be boosted by £270bn if the 75% of the SMEs with lower productivity had a similar output to the top 25%.

Around two-thirds of SME manufacturers have to re-invest past profits to grow because they cannot find suitable funding. If they were able to access appropriate new finance, 31% say they would prioritise investment in developing products and expanding capacity.

Make UK says the Government should improve access to funding for Britain’s smaller manufacturers by incentivising banks and new financial technology firms to improve access to funding.

The survey is the basis for a new Make UK report called Start-up to scale-up: Supporting SMEs to Grow. Other findings are that:
• 38% of manufacturers have the potential to scale-up and become fast-growing firms (based on turnover growth);
• 45% of SME manufacturers want to become large business within 5-10 years;
• just under ½ of manufacturers say a lack of appropriate skills is their main barrier to growth;
• 27% say better access to overseas markets would allow them to expand;
• 50% say the Government should prioritise investment in domestic transport connections to promote growth in manufacturing; and
• a third of SME manufacturers say there should be increased investment in developing industrial concentrations as well as 5G connections to create the ideal environment for scale-ups.

The scale-up challenge for manufacturers is different from other sectors because of the cost of heavy-duty equipment and industrial premises. Their investment cycles are longer, and their growth is slower than for traditional firms. Profits from any investments take longer to emerge, with banks and lenders required to exhibit “patient finance” rather than expecting quick returns. Some companies may even look as if they are making a loss in the short term, until the investment benefit kicks in further down the line.

Make UK’s research finds evidence that the pandemic has changed how financial institutions assess risk before lending to SMEs by offering stricter conditions or asking for more onerous guarantees.

The 59-page report also says that the Government needs to understand that manufacturers require “heavy investment” to expand, with benefits seen over the longer term, rather than delivering short-term gains. The long-term rewards are far larger than for other sectors and the investment can create well-paid jobs across the UK.

Make UK’s new report calls for more support for SME manufacturers

“Micro and SME manufacturers account for 99% of all manufacturers in the UK but they are being held back by a lack of access to funding, skills, physical space and exporting,” says Make UK CEO, Stephen Phipson. “Many of these issues are shared by other industries on the surface but when you get into the details it is clear the challenges faced by manufacturers differ fundamentally from the average SME. Manufacturers need access to higher levels of skill than most, they need access to finance to not only stay afloat, but capital lenders that are willing to be patient before they see growth from any investment.

“Improved trade access across borders is essential to further push forward growth but this relies on good relationships between the UK and other countries for full benefit to be realised,” Phipson adds. “There is also a job to be done by Government in improving infrastructure of transport, digital and energy across areas of the UK where these are lacking which would help push the levelling up agenda.

“The current level of investment in promoting and sign-positing to available support is not working. Three in five SME manufacturers remain completely unaware of the business support and finance that exists to incentivise growth.”

Make UK:  Twitter  LinkedIn

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