2022 was a turbulent year for businesses in every sector. From aftershocks of COVID-19 to the cost of living crisis and war in Ukraine, new challenges seemed to appear every month.
Arguably, no one sector bore the brunt more than manufacturing. And according to findings from MAKE UK’s annual Executive Survey, these challenges will continue in 2023.
Today we’ll be combing through the data to give you the 5 key takeaways.
Takeaway #1: Rising Energy Bills Calls for Creativity
It won’t surprise you to know that energy costs are a big topic of concern for manufacturers. 70% of manufacturing leaders said that energy costs are expected to increase significantly in 2023. A further 20% expected a moderate increase.
Even government support doesn’t seem to be softening the blow. Almost 4 in 10 manufacturing leaders say the Energy Bill Relief Scheme won’t reduce their bills to a reasonable amount.
But of course, these costs still have to be paid. So, manufacturing leaders are getting creative – over half are planning to adjust their business practices to reduce energy usage. A similar number are increasing product prices, and 39% are looking into generating their energy onsite. All these changes impact business operations. They may, in turn, change their interactions with consumers, and their profit margins.
Takeaway #2: Employment Costs Hit Smaller Manufacturers Harder
Data backs up what leaders have been seeing in the industry for years – there’s a chronic labour shortage. ONS data in November 2022 showed there were 90,000 live vacancies in the sector. with 36% of them considered ‘hard to fill’ – i.e. the vacancy has been live for six months or more.
The costs of employing people – salaries, pensions, and other benefits – are rising. This will impact every manufacturer, but the survey highlights the disproportionate one on smaller companies. 9 in 10 manufacturers with 10-249 employees said employment costs were likely to either significantly or moderately increase in 2023. This is compared to 76% of large manufacturers (employing more than 1,000).
Takeaway #3: Supply Chains Will Continue to be Squeezed
Despite many of the COVID-19 restrictions easing in latter 2022, supply chains have been slow to recover. And even if they had, supply chains have been tested in other ways. Whether it was rail workers striking across Europe, Hurricane Ian in southwest Florida, or the EU reducing gas usage in the wake of Russia invading Ukraine, 2022 saw manufacturers bruised by external events. Many leaders fear this will continue in 2023. 87% of them expect logistics or transportation costs to increase either significantly or moderately, while 58% see significant supply chain disruption as a barrier to competitiveness.
Takeaway #4: Instability Has Harmed UK Manufacturing’s Global Status
Speaking of those external events, their effect is extending beyond manufacturers’ day-to-day work.
A sizeable amount of those surveyed (43%) disagreed that the UK would be an attractive place for non-UK businesses to invest in. One thing you need when deciding to start operations in a country is stability – not something our political landscape has had over the last year. The result of this is reduced economic growth, caused by less investment from international businesses.
Takeaway #5: Plans for Investment Remain Unchanged
With everything mentioned above, you might think investment plans have been scaled back. But, that isn’t the case.
In fact, many manufacturers are looking to increase investment this year. The areas being focused on are new product development (57%), upskilling or retraining staff (52%), and green technologies (43%).
These aren’t just short-term sticking plasters, but long-term strategies. Manufacturers are taking proactive steps to meet challenges, thinking about impacts now and in the future.
Each manufacturer will have internal issues to deal with – but what MAKE UK’s survey highlighted were the external issues. Larger-scale policy changes would have the biggest impact here. Almost half of the manufacturers favour extending the Energy Bill Relief Scheme. This doesn’t seem to be on the horizon – but as 2023 rolls on, manufacturers continue to innovate to get the best for their business.
Read the full survey here.
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