Martin McTague
National Chair, Federation of Small Businesses
Small manufacturers have not had an easy couple of years. The COVID pandemic has prompted many small manufacturers to retool, change ways of working and rethink their product ranges.
The ever-changing climate is a challenge for manufacturers, but the added impact from the pandemic has forced these businesses to adapt in order to survive.
Challenges facing manufacturers
Extra regulations around imports and exports and supply chain issues have been a major challenge for manufacturers, impacting supplies of materials and components. Longer delivery times forced small manufacturers to keep a close watch on input and inventory levels, with many having to increase their warehousing capacity.
Inflation is hitting manufacturers especially hard. While 78% of small businesses told us the cost of running their business in the last quarter of 2021 was higher than in the same period the previous year, for small manufacturers that figure was 89%, with 27% reporting a “significant” increase. Inputs were cited by 84% of small manufacturers as contributing to the rise in business costs, with fuel and utilities also playing a large role.
Late payment is especially damaging to small manufacturers, whose businesses are threatened if they are unable to pay for the inputs needed to keep making products. This is an area where government action would be especially welcome, with greater board accountability and enforced sanctions for persistent offenders.
It is often in smaller businesses that innovation and creativity are given free rein, driving growth and improving productivity.
Investing in self-sufficiency
Energy price spikes have provided a sharp illustration of the potential benefits of microgeneration, where businesses invest in producing their own energy; 18% of small businesses have already taken steps in this direction. We were pleased that our campaign was successful in excluding ‘green’ improvements to business premises from business rates valuations.
With manufacturing tending to be energy-intensive and requiring reliable energy supplies, there is clearly more the Government can do to encourage small firms to become energy-independent, while also helping us move towards a net zero economy.
We are recommending the introduction of a ‘Help to Green’ initiative, modelled on the Government’s ‘Help to Grow’ scheme, to spur progress in this area.
Embracing the challenge
It is often in smaller businesses that innovation and creativity are given free rein, driving growth and improving productivity. The pandemic has added new challenges to underlying issues, while small firms in manufacturing and beyond will be vital to our economic recovery. Resilience and adaptability will be key, with big opportunities open to those small manufacturers with a clear vision for the future.