At the start of this year I asked more than 1,000 firms to share their predictions for the year ahead as part of Company Check’s 2016 Business Census. The manufacturers I spoke with offered some eye-opening concerns: anticipating the biggest challenges for their business this year as well as looking back at the highs and lows of 2015.
The figures revealed, at least on the surface at least, that manufacturing in the U.K. is in good health right now. Seventy-one percent of the companies I spoke to reported that their business grew in terms of turnover last year, second only to construction as a sector and above the likes of finance, health care, retail and professional services.
An even greater number, 78 percent said they expected their turnover to grow further in 2016, so clearly there are lots of reasons for manufacturers to be optimistic right now. However, hidden below the headline figures was a story of an increasingly challenging environment for manufacturers trying to do business.
The Economy Strikes Back as Firms’ No. 1 Concern
Just when we thought that almost a decade of economic uncertainty was firmly behind us, it looks like the economy is back as the biggest source of concern for manufacturers in 2016. Forty-two percent rated it above finance, marketing, politics or recruitment as the biggest probable challenge for their business this year.
Two months into the year, we’re already seeing these concerns were well-founded, with China’s slowdown shaking global markets and stalling manufacturing output and currency woes causing concern in the U.K. and U.S. Meanwhile, the planned increase of the U.K.’s National Living Wage will put extra pressure on as of April 2016, with many saying that either jobs cuts or price rises will be the result.
"As far as the wider economy goes, the increase in the minimum wage is going to be a challenge for every manufacturer in 2016. It's a positive step in principle for the Government to be taking but something which we'll have to balance carefully in practice.”
—Jo Huggett, co-founder, 4eco Ltd
Recruitment Will Continue to Pose a Challenge
Finding the right staff with the right skills is an ever-present problem for manufacturing firms in any industry; so it was no surprise to hear that recruitment was the biggest challenge firms had to face last year. The problem isn’t expected to go away this year either, and with three quarters of firms saying they’re expecting growth, the demands already being placed on staffing levels are likely to increase.
“Recruiting, particularly outside of London and in our sector, is challenging because manufacturing is not seen as enticing by highly skilled workers in ancillary professions. It’s still going to be a big challenge in 2016 too.”
—Shashi Kapoor, Harvey Water Softeners
Political Concerns Keep on Growing
Almost 50 percent more businesses were most concerned about politics and the impact it could have on their business in 2016, and this was also true of manufacturers. This is perhaps unsurprising given the heightened terror threat after the Paris attacks and at the start of a potentially turbulent year, which will see the U.K. vote on its EU membership and the U.S. experience its most unpredictable presidential race in years. The outcome of both will be watched closely by manufacturers.
“This (concern) in the mind of business will largely be due to the impending EU referendum. A clear potential outcome, whether that was staying in or leaving, would probably be preferable to the uncertainty we have now. It is therefore likely that some significant investment decisions will be deferred until the outcome is known.”
—Neil Austin, formerly Global Head of Markets at KPMG
Local Government Will Have to do More
However, manufacturers expressed their strongest opinions about an issue closer to home: the question of whether or not their local authority was doing a good job. Almost 60 percent said no, a huge number and a real cause for concern for local authorities. Given the nature of the respondents — predominantly SMEs with little love for government generally — the fact that they achieved a 40 percent rating could be seen as surprisingly good.
For the year ahead, large numbers of manufacturers felt this apathy would only get worse unless drastic steps were taken by local government to redress the balance.