Study paints gloomy outlook for manufacturers in 2017
More than a fifth of UK small and medium-sized enterprises (SMEs) think the rising costs of imported goods will be their biggest threat going into 2017, new research has found.
According to the Bibby Financial Services’ Q4 SME Confidence Tracker, these concerns are of particular concern for manufacturers, with almost a third (29 per cent) worried about inflating import costs.
Internally, 18 per cent of manufacturers cite increasing competition as their biggest concern, while 11 per cent think late payments will lead to the collapse of their business.
When asked about investment ambitions, the average UK SME plans to invest around £49,237 over the next three months – less than half the £101,919 of intended investment in Q2 2016.
Again, manufacturers are looking towards a more tentative future, with projected investment falling more than 150 per cent during the same period.
The pound dipped below the $1.1985 level – a 31-year low – before settling just above $1.20 on Monday. It means that the pound has fallen more than 20 per cent against the dollar since the UK voted to leave the European Union in June last year.
A weaker pound is favourable for exporting goods abroad, but has a polar effect on businesses which rely solely on imports.
David Postings, global chief executive of Bibby Financial Services, claims that manufacturers are looking towards efficiency rather than investment for growth at the start of 2017.
“The manufacturing industry has recently grown at the fastest rate for 25 years, fuelled by an uplift in exports due to the pound’s depreciation, but manufacturers that are reliant on importing goods and selling solely in the UK will see margins being significantly eroded,” he said.
“These businesses are facing the challenge of maintaining profitability while remaining price competitive. This equation is causing a headache for many businesses and we are seeing many SMEs start to tighten their belts and pull back investment.”