UK Engineering SMEs Report Low Confidence and Flat Demand

Mon 8 Oct 2018
Posted by: William Barns-Graham
Trade News

Sir Ronald Halstead, President of the Engineering Industries Association (a trade association member of the IOE&IT), recently attended a meeting with the Bank of England and fed back several key findings about the optimism of SMEs in engineering, following a survey the EIA conducted over the summer.

UK and Export demand has remained flat since the last such survey was conducted in March, with overall growth remaining flat and business confidence slightly down.

Of course, with uncertainty remaining around Brexit and rising fears around the impact of a hard Brexit on companies’ supply chains, these findings come as no real surprise. Indeed, the findings mirror other research surveys being conducted in other sectors – including our own Brexit and Export Optimism surveys earlier this year.

Further, with investment from the Big 5 Banks stalling, SMEs are increasingly looking to live within their own cash flows – though alternative trade finance markets continue to expand.

The survey also shows that the number of people in employment is approximately the same as it was when the survey was last conducted in March 2018, with the average increase in pay per employee in the 0-2% region. 59% of respondents expected to increase their prices soon, compared to 52% in March.

Companies continue to report skill shortages – something which could become a greater source of concern should the UK stop the freedom of labour movement from the EU. Skills shortages around exporting are a problem we at the Institute are indeed trying to solve through our qualifications, which are now accessible for free or at significantly reduced rates through the apprenticeship levy.

Key findings

  • Business Confidence is down slightly
  • Overall Growth is approximately the same
  • UK Demand is flat
  • Export demand is flat
  • The number of people employed is approximately the same
  • The average increase in pay per employee is still mainly in the 0-2% area
  • The living wage is affecting business in 24% of the survey compared to 26% last time
  • There are still skill shortages
  • 59% of survey expect to increase prices compared with 52% last time
  • Investment intentions are approximately the same as last time

Selected comments from survey respondents

Brexit is key – if we are to leave, there has to be an ‘acceptable’ deal. A ‘no deal’ Brexit with create huge issues to the point of chaos!!

Sad that the consequences of Brexit were NOT able to be foreseen and predicted and given to the people when the vote was held and led by the emotional verbal gestures of anti-immigrationists. 50% of the people voted in the election and of those, 55% voted to leave, which meant 27% of the English population decided the future of the whole of the UK, in ignorance. The Government should have been robust and provided details of what would happen. Enough of them have got degrees without any meaning it seems. No overseas company wants to invest or be here in the uk (small letters) after Brexit, which is showing now, big time. Costs will escalate to everyone with imported goods and the abilities lost in the past to create so many things ourselves and mutual understandings and advantages or EU Liaisons of joint ventures, lost. I could go on and on.

We consider the EU ruling on holiday pay is a bad move for UK business and the sooner it reverts back to as it was the better it will be for both workers and management.

We are trying alternative sources of finance to fund growth of our US subsidiary.

As with all business it is a matter of looking for the opportunity and not sitting and waiting. As a manufacturing company of its own products you have to keep looking forward and to find your new customer base. We are sure that the next 2 or 3 years will be bumpy but we have to try and flatten that bumpy ride with innovation and resourcefulness.

UK demand is lower than previous year. Export demand is about the same. Wages are rising by more than official inflation figure due to skill shortage in certain disciplines.

I am asked on increasing occasions how Brexit will affect our business. Until we know what Brexit agreements are made, how can we assess the impact? We can run scenarios but only based on estimates and judgement.

Very concerned over Brexit and the strength of the £.

Recent interest increases have not and will not realise any benefits. GBP Sterling remains weak. Overall data concerning employment is strong however there will be no wage inflation. The MPC has misunderstood the situation and may well need to reverse their decision.  This may signal that they actually do know what they are talking about. The recent interest rate increase was wholly unnecessary.

Uncertainty over Brexit remains a key concern.

Brexit uncertainty has triggered contingency plans with part of the UK production moving to Spain.