Tag: Manufacturing

Region’s manufacturers still planning investment despite Brexit concerns

Half of North West SME manufacturers plan to increase their capital investment spend in the next 12-months despite the uncertainty of Brexit, according to an influential business survey.

 

The latest MHA Manufacturing and Engineering Report shows that only 30% cite trading tariff concerns over Britain’s pending departure from the EU as their main barrier to future growth.

 

Rising production costs and recruitment issues are the two biggest potential issues cited in the survey.

 

The report is compiled by with MHA Chiks, Lloyds Bank Commercial Banking and the Institution of Mechanical Engineers.

 

Respondents to the survey identified their main growth opportunities as increased customer demand (18%), diversification (14%) and a wider product range (13%).

 

Ginni Cooper, head of the manufacturing team at MHA Chiks, said: “This survey gives great insight into what’s happening within the sector at a ‘grass roots’ level. Yes, there are concerns over the rising cost of materials, the unpredictability of the pound and a continuing crisis around the skills shortage, but businesses are demonstrating their resilience.

 

“Brexit uncertainty is not necessarily having the impact some would lead us to believe. What our respondents agree on is they need greater support from the Government over automation and forging better links with local schools, colleges and universities to improve the talent pool.”

 

The survey found:

 

-71% of manufacturers reported revenue growth in the last year and 70% predict business growth over the next 12 months.

 

-51% have high or above average business expectations over the next 12 months (increasing to 54% over the next three years) and 50% are looking to increase their capital investment spend in the coming year.

 

-58% of respondents export products and all exporters currently do so to the Eurozone.

 

-93% believe their main competitors are based within the UK and 35% agree they’re within their own region.

 

-Only 30% cite Brexit uncertainty and trading tariff concerns as their main barrier to future success and just 34% have a strategy in place for post Brexit – 66% feel they cannot plan for the impact until they know the Government’s strategy and EU response.

 

-92% believe rising production costs will impact their business next year, but in a positive move, 67% intend to absorb any price increases, rather than pass them onto customers, and 52% intend to achieve this through improved productivity and efficiency.

 

-Staff recruitment is an equally big issue; 81% of respondents report problems in finding people, yet 49% expect to increase payroll numbers next year. Out of these, 63% will opt for apprentices.

 

When considering rising production costs, firms believe this is a result of increasing cost of raw materials (72%), wage costs (66%), volatile energy prices (47%) and changes in the cost of components (43%). To counter this, 52% say they have included lean manufacturing principles in their future business strategies.

 

When looking at productivity barriers, 27% cite poor factory/plant infrastructure, 26% low skills levels, 23% staff shortages and 22% lack of investment.

 

Growth barriers were identified by a few; 19% said recruiting appropriately skilled staff could hold them back, 11% cited working capital constraints and 10% the global economy. To counter this, 41% say they will invest in existing staff, offering training, benefits and production bonuses and 22% will update machinery.

 

Research and development is equally high on the agenda, with 89% of respondents investing in this area. Yet, MHA is concerned that almost half of these firms, 48%, failed to apply for R&D tax credits, saving themselves thousands of pounds.

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The Engine – Issue 3

Welcome to the third edition of The Engine, MHA’s Manufacturing & Engineering Newsletter.

At MHA, we’re passionate about UK manufacturing and engineering. MHA members act for thousands of businesses across the country, including OEMs, those in the supply chain, as well as engineering companies and tech businesses.

As we head towards the post Brexit world, we think it’s more important than ever to champion our UK sector, which is why we look to share best practice right across our client base. As well as delivering
accounts, audit and tax solutions, we also support skills initiatives, run forums and hold seminars, all aimed at helping our clients in the sector to do better.

Along with others such as Lloyds Bank, Innovate UK, the High Value Manufacturing Catapult and Autodesk, we’re a member of the Future of British Manufacturing Initiative (FOBMI).

FOBMI is a collaboration between leading UK industry organisations focused on increasing the competitive advantage of UK Design and Manufacturing companies, by removing the barriers to true productivity and innovation.

How could R&D tax credits and capital allowances benefit your manufacturing business?

In our latest Manufacturing video Ginni Cooper, Partner and David Hackett, Tax Director discuss Research and Development tax credits and capital allowances and what this means for a business.

 

For a typical SME, in terms of cost savings, R&D tax credits can attract 230% tax relief. An R&D project can develop a new process, product or service or it can improve an existing one.

 

What type of projects qualify for the relief?

• Any project that seeks to achieve an advance in science or technology.
• A project needs to aim to resolve scientific or technological uncertainties that cannot be easily resolved by a competent professional working in that particular field.

 

The main qualifying costs that attract relief are;

• Staff costs
• Items that are consumed in the R&D process (e.g. materials, utilities etc)
• Sub-contractor costs
• Any software you employ in the R&D project – the license fees for those will qualify.

What are capital allowances?

• A form of tax relief for capital expenditure on items such as fixtures and fittings, equipment, vans, lorries etc.
• Most businesses can obtain tax relief on up to £200,000 per annum of capital expenditure. For a company that fully utilises that allowance every year they will benefit from a year one up front tax saving of £38,000 based on the current corporation tax rate of 19%.

 

Ginni and David also discuss whether large companies can claim under the scheme as well as SMEs and what is available in terms of capital allowances for those businesses that are spending more than £200,000 p.a.

 

manufacturing

How can UK manufacturers and engineers remain competitive and innovative?

The extraordinary sight of a 1965 Ford Mustang powering up the famed hill climb at the Goodwood Festival of Speed recently was certainly something to behold – because this 53 year old car was driving itself! The legendary vehicle had been retrofitted with autonomous driving technology as a result of a partnership between Siemens UK and Cranfield University. Whilst the vehicle was not entirely autonomous in the truest sense as it followed a pre-determined program of the Goodwood track, the head turning vehicle demonstrated how cutting edge technology can change or augment a manufacturing process or product significantly, regardless of antiquity. In a world where the consumer is in control, innovation and adaption to change is key to remaining competitive.

 

One thing that stands out in the Ford Mustang example is collaboration, a partnership between two organisations working together to achieve a common goal or to make something together. Often when we consider research and development we think of trade secrets, we conjure up visions of men and women in white coats, working away on something mysterious, behind a locked door. But consider this – if we all happen to be working on wonderful things separately, think about how successful we could be if we worked together! Or perhaps the opposite – if we’re all concentrating in siloes on our own problems and challenges, surely we could benefit and solve issues quicker if we worked in unison. It may seem a strange concept but operating collaboratively has been one of the key success factors for our German counterparts where small manufacturers, larger ones and the government work together to improve the industry as a whole. Even on a small scale, our manufacturers can help each other – there have been countless times when a factory tour has created a lightbulb moment, when the sight of a process or routine can instigate a notion to replicate in order to improve one’s own business.

 

Another interesting element of the collaborative approach is the interaction between business and educational institution. What better way to promote manufacturing and engineering as a career choice than to get the students involved at a hands on level. The skills gap is all too well publicised and businesses can aid themselves by motivating young people, helping them to visualise the opportunities available to them. Working together with education providers, businesses can demonstrate the positive impact that manufacturing and engineering can have on social, technological, economic and environmental surroundings, in addition to the variety of skills that are encompassed within it. This would seem an appropriate way of dispelling the myths around what it means to be an engineer and inspiring the workforce of the future.

 

As we move towards the technologically driven future of 4IR the sharing of ideas, successes and failures will surely be a swifter way for our UK manufacturers and engineers to remain competitive and innovative.

 

If you would like to discuss this blog in more detail please email Ginni Cooper or call 01772 821 021.

 

Alternatively, please fill in the form below with your enquiry or comment and we will respond to you as soon as possible.

 

The manufacturing and engineering talent drought and utilisation of the apprenticeship levy

One of the most talked about realities of modern manufacturing and engineering is the shortage of skilled workers available, with severe skills shortages across the industry at an all-time high. As time goes by many skilled labourers are reaching retirement age, which lowers the number of overall skilled workers as less employees join the field. This is raising concerns about the long-term sustainability of the industry.

 

There are a number of issues which are causing this decline, from the perception that all manufacturing and engineering jobs involve wearing boiler suits and carrying oily rags, to the ideology that the majority of the workforce are slowly being replaced by an army of robots. This is also coupled with the image that the industry is low paying, with the majority of the work being repetitive and lacking in creativity.

 

Solving the talent drought is not just about attracting new entrants, but investing and buildings skills pools in areas such as AI and robotics, whilst holding onto the traditional areas of expertise which have served the industry well throughout the years. This can be achieved by creating an attractive place to work, offering new opportunities through innovation and technological advancements, and offering the training packages to students in these developments.

 

It has often been thought that universities would fill the skills gap, but with annual fees up to £9,250, this is not the greatest incentive, with declining numbers of students taking relevant degrees in the industry. With the government announcing the Apprenticeship Levy in the Summer Budget 2015, and taking effect on and after 6 April 2017, it is an ideal tool for manufacturers and engineers to start to bridging the skills gap.

 

The Apprenticeship Levy is a a Levy on all UK employers with an annual pay bill in excess of £3million. Each employer receives an allowance of up to £15,000 each year to offset against their levy payment, and in certain cases employers who are committed to training will be able to get more back than they put in. Currently the Apprenticeship Levy can help fund training in several sectors from aerospace to civil engineering, at levels from GCSE to Masters Degree.

 

If you would like to discuss the above blog in more detail, or you would like to speak with a member of our team, please contact Paul Locker or call 01772 821021 to be put in touch with a member of our Manufacturing team.

 

Lancashire Business Festival 2018

The Lancashire Business Festival is set to showcase a fantastic range of business related events taking place across the county during March 2018.

 

The region is well-known for hosting a wide variety of events which offer everything from business support to promotion of local services and products and the celebration of innovative organisations in Lancashire.

 

Local organisations supporting this exciting initiative include the North & Western Lancashire Chamber of Commerce, Shout Network, the University of Central Lancashire (UCLan), MHA Chiks, Lancashire Business View and Boost.

 

This year “Manufacturing Week” will play a key part in the Lancashire Business Festival. With its long heritage of manufacturing, Lancashire continues to be at the heart of the UK’s manufacturing sector.

 

One of the Manufacturing Week’s key supporters is accountants MHA Moore & Smalley. Danny Houghton, Partner in the company, commented, “Manufacturing within Lancashire is vibrant and diverse and the Manufacturing Week showcases Lancashire’s talent, brings in quality speakers from across the globe and offers an excellent opportunity for like-minded businesses to network and learn from each other. Bringing the Manufacturing Week into the Lancashire Business Festival opens it up to a wider business audience and the more people who know what a success story Lancashire manufacturing is, the better!”.

 

Book your place at Lancashire Manufacturing Week 2018.

 

Monday 5 – Tuesday 6 March

UCLAN New Product Development Workshop

 

Wednesday 7 March

Trading Internationally

 

Thursday 8 March

Growing your Manufacturing Business

 

Friday 9 March

Brexit Preparation for International Trade

Manufacturing Week

Week of events planned for Lancashire’s manufacturers

The leaders of Lancashire’s manufacturing businesses are being encouraged to get involved in a week of free events aimed at growing the region’s manufacturing economy.

 

The fifth annual Lancashire Manufacturing Week takes place from March 5-9 and will see a series of masterclass events taking place on issues including product development, innovation, international trade, business growth and Brexit.

 

Lancashire Manufacturing Week is organised and led by accountancy and business advisory firm MHA Chiks, HSBC and UCLan.

 

Ginni Cooper, head of the manufacturing team at MHA Chiks, said: “Lancashire is home to some of the world’s most inspiring manufacturing businesses. This week is dedicated to shining a spotlight on them on and how they can continue being successful in these unpredictable times.

 

“The inspiration, advice and support on offer at these events will equip manufacturers with the information and knowledge they need to grow.”

 

The first events take place at UCLan on March 5 and 6 with two product development workshops delivered by business and innovation experts.

 

On March 7, Burnley-based global manufacturing business VEKA Group hosts a panel of industry leaders and experts to discuss international trade issues.

 

On March 8, HSBC in Preston will host a session on ‘Growing your Manufacturing Business’. On March 9, the North and Western Lancashire Chamber of Commerce will host a session on ‘Brexit Preparation and International Trade’.

 

Speakers at the various events include, Anastassia Beliakova, head of trade policy at the British Chambers of Commerce; Peter Thompson, export manager at Evans Vanodine; Richard Halstead of manufacturers organisation EEF; John Boydell, chairman of Ampios; and Michael Gibson of Miralis.

 

For more information about Lancashire Manufacturing Week, or to reserve a place at any of the events, contact Danielle Hinks at MHA Chiks on 01772 821021 / [email protected]

employer of choice

The Manufacturing Employer of Choice

As a manufacturer, have you considered how employee engagement and becoming an ”employer of choice” can be used to recruit and retain key members of staff which can be used to push forward your growth plans?

 

Recent research by the suggests remarkably optimistic growth predictions amongst our manufacturers for the year ahead. These forecasts were also mirrored in our 2017/18 manufacturing and engineering survey, with 78% of respondents expecting growth for their business. The optimism is marred however by growing concern over increased production costs and a mounting skills shortage. There is a rejuvenated and increasing trend towards re-shoring in a bid to control costs and improve processes. Wage costs are generally going in one direction and to control these can seem impossible but perhaps the key is to get more out of your workforce by managing retention and recruitment – in essence to establish yourself as an “employer of choice”.

 

A common complaint amongst business owners revolves around recruiting, and retaining, younger people in to their company. Industry stigmas and attitudes to work have their part to play but a well prepared employer can attract the talent needed to take the company forward and respond appropriately to changes in the market. In the same way that many manufacturing processes have moved with the times, so too have employee perceptions and expectations.

 

Engagement may sound like a buzzword but it is not something to be overlooked. Understanding your business needs and having a plan is key – for example do you know what the cost of recruiting or replacing one individual is to your company? Multiplied by the number of starters/leavers this can have a significant impact on your finances and productivity levels. In order to become an ”employer of choice”, do you understand the demographics of your workforce and what is important to them? Do your employees have a voice, and is it listened to? As a local manufacturer, are you engaging with the educational establishments within your vicinity and demonstrating the opportunities available?

 

Taking the time to mull over these questions, and recognise the cost to your business of getting it wrong, can lead to a focussed strategy to retain and attract talented staff. Consider flexible working options – the constraints of production line timings might impinge upon the possibility of flexible working hours but there may be other options that could be considered. Whilst cold hard cash is what’s needed to pay the bills, additional, non-monetary rewards and recognition can be just as well received. An improved quality of work life can lead to increased efficiency & effectiveness, at little or sometimes no extra financial cost to the business.

 

As an employer you need to understand that people talk about their work, both the good and the bad. Your staff are your best marketing tool – treat them well and they will shout about it, do the opposite and they’ll shout even louder. Becoming an employer of choice evolves over time but starts with recognising and rewarding your existing staff members. Listen to them – often the best ideas come from the shop floor, are easy to implement and have the greatest impact. Investing some time in developing the right culture now should make it easier in the long term to attract and retain the right staff for your business.

 

If you would like to discuss the recruitment and retention for your manufacturing business, or you would like to speak with a member of our team, please contact Ginni Cooper or call 01772 821021 to be put in contact with a member of our Manufacturing team.

automation

Dispelling the myths around automation

Industry 4.0 has evolved from the need for increased flexibility, quality, efficiency and speed – It is a vision of changes in technology and the convergence of the digital and physical world. Manufacturers are starting to embrace the concept of the smart factory, either on a small or large scale. Whilst most of the technology used has been around for some time, it’s implementation is starting to make more commercial sense with the falling costs of sensors and the affordability and availability of cloud computing.

 

But there are still doubters, those who resist change and can only identify the negatives in a plan rather than appreciate the possibilities. Some are of the opinion that jobs will be lost as robots replace people, that the quality of a product will be compromised due to lack of supervision, or that the brand will be adversely affected due to customer reaction. In some specific cases this may be true but let’s also consider the advantages:

 

Robots replacing people

People will not be replaced fully by automation – yes people will be redistributed, but this will be one of the advantages automation brings. Where there is currently a repetitive, dangerous job being carried out by a human who is exposed to risk, there is an opportunity for automation. Safer operations will surely improve an employee’s quality of work life and possibly give them the opportunity to move into a higher skilled role. Resultant improved staff morale and a better skilled workforce can only be good for business. The key is to keep the staff in the loop, letting them know of any planned changes and setting out the impact and benefits for them as individuals and the business as a whole.

 

Product quality

As already demonstrated, the human is not being taken out of the equation, therefore a level of supervision on any production line will still be evident. What will be minimised however is the error rate that can arise due fatigue, or distraction, or ill health. Subject to the robot being correctly programmed and the quality of the materials being used, the automated production line will keep on churning out the same product to the same specification every time, with minimum wastage.

 

Impact on the brand

Consumers’ expectations are driving automation – how else can a bespoke product be ordered online and delivered the following day ? Automated processes can cut down on errors, enable faster deliveries and speed up the restocking process – autonomous fleets of delivery vehicles are not too distant a vision. All of these factors contribute to a company’s ability to review and make improvements to customer service, giving the end used exactly what they want. It may well be that it is the failure to consider automation that will impact the brand due to a perception of outdated processes or obsolescence.

 

If you would like to discuss Industry 4.0 in more detail, or you would like to speak with a member of our team, please contact Ginni Cooper or call 01772 821021 to be put in contact with a member of our Manufacturing team.

Industry 4.0 explained

Industry 4.0 explained

 

 

Industry 4.0, the fourth industrial revolution – Or whichever title you prefer is currently extremely topical for the manufacturing sector.

 

It can bring many benefits to a business such as increased outputs, improved efficiencies, accuracy and quality – But what does it actually mean for the industry?

 

In our latest video for the Manufacturing sector, Corporate Services Director and Head of Manufacturing and Engineering Ginni Cooper, is joined by Michael Mead, Client Technology Manager from the University of Central Lancashire, to discuss Industry 4.0 and what it actually means for manufacturing businesses.

 

Firstly, what is Industry 4.0? Industry 4.0 is a vision of a change in technology and an emergence of operational technologies and informational technologies meeting. To summarise, it’s the process whereby our digital world and physical world are meeting.

 

There are a number of benefits Industry 4.0 from two different perspectives, macro and micro.

 

It has a macro level which focuses on a huge change in the  way everything is manufactured, bringing in elements such as education and culture, with the larger blue-chip companies and PLCs driving these innovations and smarter technologies into manufacturing.

 

But we can also look at Industry 4.0 from a micro perspective and the idea of merging traditional manufacturing processes with smarter manufacturing processes.

 

There is a huge focus on data in the manufacturing world and much more of a data footprint in manufacturing than there ever has been previously.  This digitalisation of manufacturing is allowing manufacturers to become smarter, not only with their products, but their process and also their production.

 

For manufactures interested in Industry 4.0 there many places to go for assistance and guidance, European Funding can be particularly useful. For businesses based in Lancashire, assistance is also provided by organisations such as Boost, Lancashire Growth Fund and the DigitMe programme at the University of Central Lancashire.

 

If you would like to discuss Industry 4.0 and what it means for your business in more detail, or you would like to speak with a member of our team, please contact Ginni Cooper or call 01772 821021 to be put in contact with a member of our Manufacturing and Engineering team.

 

Maximising Tax Reliefs

Industry 4.0 can also bring about considerable tax reliefs, take a look at our latest blog for more information.

Find out more
VAT fraud

Industry 4.0 risk evaluation

The manufacturing industry is evolving at a significant pace – the need for increased flexibility, efficiency and speed of production has evolved into what we now refer to as Industry 4.0, or the Fourth Industrial Revolution. The smart factory, with intelligent networks where everything from the assembly line to goods outwards is connected, autonomously exchanging information and triggering actions, is becoming the norm.  Whilst this revolution can be extremely beneficial in increasing efficiency, it also brings with it new risks that business owners need to consider.

 

These cyber-physical systems cover smart machines, storage systems and production facilities – not just in one factory but possibly across many. In addition, many manufacturers are now closer to their business partners and openly share knowledge and data up and down the supply chain in an effort to harmonise systems and increase productivity. While the integration of systems that were once separate benefits manufacturers, it also carries risks in particular to security. Processes that were once isolated are now vulnerable to cyber attacks that may cause disruptions or loss of assets, at enormous cost to businesses.

 

Just as manufacturing businesses employ people to spend time and resources on ensuring that machinery is properly maintained and serviced, so the same levels of care and attention must be paid to security. Highly confidential data must be encrypted to ensure that only those with authorisation have access. Network security, deployment of anti-malware, instilling data loss prevention solutions should all be considered to protect systems, processes, IP and high value data assets.

 

In a similar way to which health and safety, or production maintenance is approached, business owners should develop a plan – a risk management strategy to define who will be responsible for identifying threats and weaknesses within the system, how these will be prioritised and what can be done to mitigate the risk. Being prepared for the possibility of attack is important, it is impossible to be 100% secure so a response plan is essential. Even with the best preventative measures, attackers can gain access to sensitive systems. In this case, it is vital to detect the attack as soon as possible, isolate affected systems and take remedial action. All staff in the business should be made aware of such plans and take responsibility for their part in the process. In addition, as manufacturers are increasingly sharing data across supply chains, there is a growing need to also assess the security strategies of business partners.

 

As part of the planning process in the move towards a smart, connected factory, the business owner that evaluates and manages the associated risks should be well placed to take advantage of the competitive edge offered by Industry 4.0.

 

If you have any questions or would like to discuss Industry 4.0 with us in more detail, please contact Ginni Cooper or call on 01772 821021 to be put in contact with a member of our Manufacturing team.

Five ways for manufacturers to solve the ‘productivity puzzle’

The ‘productivity puzzle’ and the ‘productivity gap’ are two phrases you may have heard quite a bit over the last few months.

 

While there is no doubt the UK economy is growing, there are concerns at the highest levels of government about the quality of that growth. In other words productivity, the value of output per hour worked, is not where it should be.

 

According to economists, the increases in national output since the economy bottomed out in 2009 have been largely the result of a bigger population and an increase in the workforce. The argument goes that, so far, we have not seen the usual pickup in productivity that normally accompanies an economic recovery.

 

There are fears that the length of the recession and downturn, and the lack of investment this spawned, has severely dented UK productivity and, hence, it has not recovered as quickly as it did following previous recessions. It’s one of the reasons chancellor George Osborne says he will publish a productivity plan in the coming weeks ahead of the summer budget in July.

 

So what can manufacturing companies do themselves to boost productivity within their own business? Here’s some thoughts on how businesses can use a range of tax incentives, business support and employee relations initiatives to boost productivity.

 

Renew ageing plant and machinery

 One of the reasons for our low productivity in the UK is thought to be that we’ve spent less than our European peers on plant and machinery. Companies have run their assets into the ground, rather than replacing them with new and better equipment. Instead, they have used cheap and plentiful labour, rather than increased capital, to expand output. With the shake-up in the banking sector leading to greater availability of funding, and generous (for the time being) capital allowances, now could be the time for manufacturers to steal a march on their competitors by investing in ailing infrastructure.

 

Invest in training and skills

The quality of the workforce is another key to increasing productivity, yet George Osborne pointed out recently that the UK is “one of only three OECD countries where the skills of our 16 to 24 year olds are no better than our 55 to 65 year olds”. There is an opportunity for businesses to increase their productivity by improving the knowledge and skills of their staff, as well as improving their recruitment and selection processes. With a range of business support programmes focussed on skills, many of them subsidised by government schemes, now could be the perfect time to assess what skills and knowledge could take your business to the next level.

 

Strive for greater employee engagement

A happy workforce is a more motivated workforce, or so the old adage goes. Achieving better employee engagement and loyalty can bring major gains in output and quality. Look at ways to reach out and build better relationships with staff. It may be something as simple as creating an employee forum where staff ideas can be heard and acted upon, communicating more regular on company issues, or introducing a staff rewards scheme.

 

Find ways to work smarter not harder

This has a tendency to be one of those annoying management phrases, but when you actually boil it down, it make perfect sense. Focusing more energy on the more profitable work, finding small improvements to work processes, or reducing waste, are all examples of a ‘smarter not harder’ mentality.

 

Look towards lean

 It goes without saying that a less wasteful business is a more productive business. Most manufacturers will be familiar with lean principles, but how many actually practice them? By committing to introducing a lean culture, your business will be able to achieve more with less. Going lean doesn’t necessarily mean bringing a group of external management consultants, it’s more about having the will to realise a vision and getting staff engaged to work towards a common goal. It’s often achieved through incremental changes over time, rather than being something that happens overnight.

 

Ginni Cooper is a director and head of the at Chiks.

Post-election: The key issues for UK manufacturers

After months of uncertainty, the UK general election result earlier this month has finally brought some clarity to the future direction of the nation and the over the next five years.

 

I would imagine many businesses are breathing a sigh of relief now the election is out of the way, but now the hard work starts.

Just as the new Conservative government has set out its plans in this week’s Queen’s Speech, businesses face the task of devising their own strategies for making the most of opportunities for growth.

We always advocate that businesses focus on conditions in their own business and sector, not getting too carried away with what’s happening in the wider economy. However, here I set out the main considerations for UK manufacturers as a new political and economic cycle gets underway.

 

Britain’s membership of the EU

David Cameron has promised an in/out referendum on Britain’s membership of the European Union by 2017, but it could happen as soon as autumn 2016. There have been differing views on what impact this will have on the UK economy, particularly manufacturing and engineering businesses whose main trading partner is the EU.

There are fears it could shrink the economy on the back of weaker trade and reduced inward investment, as well as reducing the UK’s export markets and making imports more expensive. Meanwhile, figures like Lord Bamford, chairman of construction equipment giant JCB, believes an EU exit could actually benefit Britain as we would be able to “negotiate as our country rather than being one of 28 nations”.

 

Making the most of growth incentives

Many manufacturing and engineering businesses will be busy making plans to invest in new plant and machinery. The timing of these investments could be critical, particularly with the changes expected to the Annual Investment Allowance (AIA) at the end of this year. The AIA is currently £500,000, but is due to go down to £25,000 on January 1 2016. The chancellor said in his Budget in March that the reduction in the AIA will not be this drastic, but gave no further details. We will have to wait until the autumn before we find out his intentions, which is not helpful to businesses that wish to plan their investment.

Manufacturing businesses need to consult closely with their professional advisers on the timing of investments and to ensure they are also making the most of other incentives and tax reliefs available, such as R&D tax reliefs.

 

Corporate rates

The reduction in corporate tax rates over the course of the last parliament will have offered a welcome boost for many manufacturing businesses. The main rate of corporation tax fell throughout the last parliament, from 28 per cent in 2010 to 20 per cent from April 1 2015. This brought it in line with the small profits rate and so effectively created one corporate tax rate. With the Conservatives now governing alone, there’s no indication that corporate tax rates are going to rise anytime soon, which will offer some stability for manufacturers.

 

Finding the right people

This has been a major challenge for businesses across many sectors, but has been felt acutely by manufacturers, many of whom have struggled to replace skills lost to the recession. It will continue to be a challenge, but the manufacturing and engineering sector should be encouraged by the noises the government is making on job creation and skills. As part of the Full Employment and Welfare Benefits Bill in the Queen’s Speech, it plans to create three million apprenticeships.

 

Cutting through the red tape

Also in the government’s Queen’s Speech was an Enterprise Bill with measures to reduce regulation on small businesses in a bid to boost job creation. It will seek to cut red tape for British business by at least £10bn and also proposes to create a new Small Business Conciliation Service to help settle disputes between small and large businesses, especially over late payment practices. The government also aims to improve the business rates system ahead of the 2017 revaluation, including modernising the appeals system.

 

As always, businesses face a number of opportunities and threats. If you are a manufacturing or engineering businesses looking for some professional advice on your investment decisions, or to support growing your business, please don’t hesitate to contact me.

What will Budget 2015 bring for your sector?

metal industy factory indoor

As part of our preview to Budget 2015, we asked our sector specialists to tell us how Mr Osborne could help businesses in their sector and, perhaps more realistically, what we might expect to see.

 

Manufacturing

 

By Ginni Cooper, head of Chiks’s manufacturing and engineering team

 

If the chancellor could grant you one wish to help businesses in your sector, what would you ask for and why?

 

More support in promoting the sector as a career choice. With an estimated 800,000 manufacturing and engineering jobs to fill in the next five years, the skills gap is a real concern for the sector and a threat to future growth and innovation. I would like to see financial support to equip our educational institutions with up-to-date equipment and technologies, or perhaps reduced tuition fees for potential graduates in the sector. I would also like to see financial incentives for small businesses to engage more with their local schools and colleges.

 

What’s more likely to happen in this budget that could help businesses in your sector?

 

I want to see an amendment to plans for the Annual Investment Allowance. The proposal to reduce this from the current level of £500,000 down to £25,000 at the beginning of 2016 will be detrimental to the sector and put a halt to plans for investment in new technologies and efficient manufacturing systems.

 

If you were a betting person, what would be your ‘dead certainty’ for this year’s budget?

 

That there won’t be any show stoppers – I think there will be re-iteration of, and perhaps tweaks to, some of the successful incentives, such as the Employment Allowance and the uptake of Research and Development tax credits.

 

Charities and Not-for-profit

 

By Tracey Johnson, head of the charities and not-for-profit team

 

If the chancellor could grant you one wish to help businesses in your sector, what would you ask for and why?

 

Simplification of the VAT system. I have said this before, but it is a complicated burden for many charities both administratively and as a cost. Charities want to be compliant but as many are partially exempt the scope for error is huge.

 

What’s more likely to happen in this budget that could help businesses in your sector?

 

As part of the battle for votes, further incentives to help small businesses reduce the cost of employing staff and to encourage the offer of apprenticeships would benefit many small charities in the same way that the 2014 Employment Allowance did.

 

If you were a betting person, what would be your ‘dead certainty’ for this year’s budget?

 

Increased crackdown on tax avoidance schemes, in particular those aimed at large corporates and high-net-worth individuals.

 

Farming and Rural Business

 

By Liz Cliffe, head of the farming and rural business team

 

If the chancellor could grant you one wish to help businesses in your sector, what would you ask for and why?

 

To protect British dairy farmers from the ever increasing volatility in milk prices caused by rising supply and falling demand, particularly in China. Greater opportunity is needed to move into the export market along with support for a fair price from the supermarkets.

 

I would also like the chancellor to scrap Class 4 NICs which is a bugbear for farming businesses that operate as a partnership. This is an additional 9% charge on profits between £7,956 and £41,865 and 2% thereafter. This would allow partnerships to be treated in line with limited company entities.

 

I would also like the chancellor to introduce incentives for capital infrastructure which have been lacking previously. Farmers need to invest in capital buildings not just plant and machinery.

 

What’s more likely to happen in this budget that could help businesses in your sector?

 

An increase in the nil rate band for inheritance tax purposes from £325,000 is needed. This has remained the same for a number of years and needs to be increased in line with the increase in property prices.
If you were a betting person, what would be your ‘dead certainty’ for this year’s budget?

 

I think the chancellor will review the annual investment limits from January 2016 onwards. The current limit of £500,000, is due to decrease to £25,000 in January next year.  I suspect he will still have a decrease to maybe £100,000. This will allow businesses to continue to invest in capital expenditure.

 

Leisure and Tourism

 

By Judith Dugdale, head of Chiks’s leisure and tourism team in Lancashire

 

If the chancellor could grant you one wish to help businesses in your sector, what would you ask for and why?

 

For the VAT rate on tourism-based businesses to be reduced. There has been a huge campaign for this over the last few years which hasn’t yet been successful. There are only a limited number of areas where the government can adjust VAT rates under EU law, but tourism is one. In fact we are one of only four countries within the EU which has not introduced a reduced rate. The reduction in VAT would help many of the smaller businesses within the sector compete with the larger players, plus the additional revenue into the businesses would enable  much needed investment in properties and facilities.

 

What’s more likely to happen in this budget that could help businesses in your sector?

 

With the budget being so close to the election, I can’t see George Osborne coming out with anything too controversial, so I don’t expect any hikes in taxes. I hope he will follow his previous budgets where he has rewarded investment through the generous Annual Investment Allowance, a great tax allowance for hoteliers in particular. I wouldn’t be surprised if this is reduced down to prior levels of £250,000, but I hope it doesn’t return to the low levels of 2012 when it was just £25,000.

 

If you were a betting person, what would be your ‘dead certainty’ for this year’s budget?

 

I’m sure we will see another rise in the personal allowance and potentially an increase in the 20% tax band after David Cameron has pledged to help middle earners in recent speeches. We will also see the confirmation of corporation tax coming down to a flat rate of 20%, which has previously been announced.

 

Healthcare

 

By Deborah Wood, Chiks’s head of healthcare services

 

If the chancellor could grant you one wish to help businesses in your sector, what would you ask for and why?

 

32,000 GPs in 8,000 practices in England cannot readily sustain 350,000,000 consultations per year while effectively managing their businesses for sustainability, timely accessibility, improvement of quality, and innovation of primary care systems. Long term funding needs to be provided to assist with facilitation of merger opportunities and enable economies of scale to be achieved. This will allow general practice to really change.

 

As there is clearly a recruitment crisis in general practice. The government could waive the repayment of student loans for doctors working in general practice.

 

The chancellor might also consider a patient fee per GP visit arrangement similar to the way NHS dental fees work, this should help control demand and such funds could be used to help finance the training of new GPs.

 

What’s more likely to happen in this budget that could help businesses in your sector?

 

Short term incentive funding will be made available in an effort to retain experienced GPs in golden hand-cuff type arrangements or to assist doctors to move into general practice from other parts of the NHS. At the same time there will be additional tranches of money paid to meet particular targets on a “here today gone tomorrow” basis. Core NHS funding will not be decreased.

 

If you were a betting person, what would be your ‘dead certainty’ for this year’s budget?

 

The chancellor could well try to take credit for increased employment and consumer spending despite these largely resulting from falling fuel prices, supermarket price wars and record low interest rates, none of which were under government control.

 

With the election only seven weeks after the budget, it is unlikely that anything significant will be announced as far as the personal and business tax regime is concerned, but we could see further reductions in the annual and lifetime allowance thresholds for pension benefits.

How to survive volatility in the Eurozone

The possibility of a Greek exit from the eurozone, or a Grexit as it’s been dubbed, has looked increasingly likely in the last few weeks after the country voted in an anti-austerity party in recent elections.

 

The country is currently seeking to renegotiate the terms of its EU bailout. If it fails to reach an agreement, Greece will effectively default on its sovereign debt and be forced to leave the euro. There are concerns this could destabilise the eurozone if other countries, such as Portugal, Ireland, Cyprus and Spain, take the same position and look to renegotiate their own terms with creditors.

 

Whatever the outcome of the negotiations, if you’re a manufacturing and engineering business that trades with Greece, or you have operations in other unstable EU countries, you need to have plans in place to protect your interests.

 

While it’s impossible to fully insulate your business from all risks, here’s some practical steps for how you can look to mitigate any potential impacts.

 

Identify potential supply chain problems

If companies in your supply chain are exposed to problems in countries at risk of exiting the euro, this may cause you an issue further down the line. If this is the case you might need to consider finding new suppliers, or holding extra stock until you are able to determine your next move. Over dependency on one supplier is not good in any situation, but if that supplier is in a financially and politically unstable country this is major risk for your business.

 

Review contracts and consult your lawyers

Businesses in a country exiting the euro will be left in legal and financial limbo. Some of their contracts will be governed by local law, and could be converted into a new currency, but foreign law contracts, such as those with your business, would remain in euros. However, many of these could end up in legal disputes and you may not get paid at all. If you receive a payment in a local currency, it will probably be worth substantially less than receipt in euros due to currency devaluation. This is an issue you should look at closely with your legal advisers to assess any potential impacts.

 

Broaden your export horizons

In the same way financial and social unrest in a foreign jurisdiction can hit suppliers, it could be disastrous if the majority of your export customers are based there. Companies in countries exiting the euro will likely owe big debts in euros to foreign lenders leaving them facing bankruptcy. This could cause problems in the wider eurozone as businesses cut investment and consumers cut back their own spending. With talk of the eurozone potentially being pushed into recession, it’s sensible not to have all your eggs in one basket. Examine whether there are opportunities to open up new markets further afield, perhaps in emerging economies in the Far East and Americas.

 

Put a plan in place

As always, preparedness is the key to dealing with any potential crisis. Consider a range of potential impacts and put contingency plans in place for dealing with these threats. For example, prepare different cashflow forecasts that take into consideration the impact of losing a major export customer, or consider how you will fulfil orders if it takes longer to get paid by customers. This is all part of sound risk-management which is a good habit to get into anyway.

 

Stay positive

While the constant headlines about eurozone exits and sovereign debt defaults can be unsettling, it’s important to remember not to panic. Monitor the situation, but don’t let it affect your thinking more than it ought to, or force you into irrational decisions. As I’ve always said, the decisions you take need to be based on your own management information and conditions within your own sector, which may render the eurozone situation insignificant.

 

Ginni Cooper is a director and head of the at Chiks.

Seven New Year growth pledges for UK manufacturers

The start of the year is that time we all make resolutions to be better people and break bad habits.

 

It’s the same for businesses as it is people, so for my first manufacturing and engineering blog of the year, here are seven pledges I believe all manufacturing and engineering businesses can make to achieve their growth aspirations this year. Repeat after me:

 

I will invest in research and development: The ability to innovate is what makes manufacturers successful. With , there’s never been a better time to invest in research and development to stay at the sharp end of your sector. You’d be surprised as what qualifies for R&D too. It isn’t just the domain of major drug companies and science businesses, almost any business can qualify if it can demonstrate using research to resolve a technological uncertainty.

 

I will invest in my workforce: Businesses can’t grow without the right people. Convene a meeting with your senior management team to identify the skills needed in the business and make it a priority to fill those gaps. Whether it’s bringing in an experienced manager or starting an apprenticeship programme, take action to stop your workforce stagnating. In many areas, financial support is available for training your employees.

 

I will become an exporter: By limiting your customer base to the UK you are potentially missing out on lucrative new revenue streams. Many manufacturing businesses believe they are too small to export, that there is no market for their products outside the UK, or that the prospect of dealing with international customers is just too daunting. But it’s not as hard as you think and there’s lots of support available from organisations like UKTI.

 

I will get to grips with modern marketing: Digital media has changed the way businesses cultivate new sales opportunities. While traditional marketing methods still apply, you could be missing out if you are not making the most of your website. Is yours up-to-date? Does it reflect where your business is now? Can people view it on phones and tablets? Could your business benefit from video and social media? Speak to the professionals to get the most from your marketing.

 

I will make my knowledge razor sharp: Technology continues to change at seemingly unrelenting pace. If you don’t keep up there’s a chance you’ll be left behind. Set time and budgets aside for finding out about new and emerging technologies and other developments in your sector. What new plant and machinery is available? Could you benefit from tax breaks for investing in new kit? Could your business benefit from 3D printing or robotic production? Pride yourself on being in the know.

 

I will get into good habits and stick with them: We’re all guilty of letting our resolutions slip as the year wears on, but if you focus on doing fewer things well and making incremental improvements it’s easier to stick with them. Look across the business and pick one thing that you will do better in the finance team, one thing you will do better operationally, one thing you’ll do better from a HR perspective. Not trying to solve every single problem straight away will make it easier to focus.

 

I will invest in : Nobody can do it all on their own. It’s about having a good team around you where different skills complement each other. This extends to your external advisers too. Invest in relationships with advisers you trust implicitly, whether that’s your accountant, lawyer, mentor, a non-exec director, marketing manager, or other consultant.

 

For more information, please contact .

Autumn Statement 2014 series: Put skills at the top of manufacturing agenda

I have discussed in a number of recent blog posts how the skills gap is still a major concern in the manufacturing and engineering sector.

 

While there has been some collaboration between some of the big companies, notably Siemens and Renault, and the education sector, I would like to see more incentives for smaller manufacturing and engineering businesses to engage with their local schools and colleges.

 

The creation of University Technical Colleges (UTCs) for 14-19-year-olds, led by universities and funded in part by large manufacturers, is a step in the right direction for equipping people in education with the right vocational skills they need to secure employment in industries such as manufacturing.

 

In our recent MHA manufacturing report we called for greater steps towards ‘demand-led’ education and I would like to see the chancellor pledge further financial support to encourage more initiatives of this kind.

 

Elsewhere, energy costs are a significant concern to manufacturing businesses and some sort of control needs to be gained over the constant price rises businesses are seeing. Whether this would be through some form of tax rebate or other payment for the most productive manufacturers I’m not sure, but something has to be done.

 

I fear that all the good news around re-shoring and making the UK a competitive place to manufacture will be lost if these rises are allowed to continue to erode margins.

 

is head of the manufacturing and engineering team at Chiks.

 

Profit improvement for manufacturing businesses

In this video Chiks’s Corporate Services Director Ginni Cooper is joined by David Howard from the Manufacturing Institute for a discussion focusing on the new Profit Programme for manufacturing businesses. The programme targets small to medium manufacturing enterprises and aims to deliver sustainable and successful business growth.

 

Ten facts the ONS has taught us about UK manufacturing

The Office for National Statistics (ONS) has this week released a detailed report on the UK manufacturing sector which will challenge the popular notion that it is ‘the sick man of Europe’.

 

I have been looking carefully at this report (Changing Shape of UK Manufacturing) and I am pleased that it confirms what many manufacturers have been saying all along, which is that the manufacturing sector is not just alive and well, but is adapting, thriving and growing.

 

Here’s 10 of the findings I found most interesting from the latest research, many of which are a cause for celebration, rather than commiseration:

 

  1. 1.     UK factories are more competitive now than at any other time in the modern era

While the number of people employed in manufacturing may have declined by over 60 per cent since 1978, overall manufacturing productivity has increased. Manufacturing productivity is actually growing at 2.8 per cent per year, higher than the overall economy. According to Joe Grice, the ONS’ chief economist, this is due to a “a better quality and more skilled workforce; a shift from the production of low to high productivity goods; an improvement in the information technology base; more investment in research and development and a more integrated global economy”.

 

  1. 2.     Manufacturers that invest more in IT do better

While this may sound obvious, the latest data puts forward a strong case for investment in IT and connectivity. It shows a direct correlation between firms where fewer employees have access to a broadband connection and decreased productivity – a drop of one per cent each year between 2001 and 2007. Firms with better connectivity grew over 11 per cent year-on-year during the same period.

 

  1. 3.     Investment in skills equals success

The data shows that the proportion of hours worked in the manufacturing sector by employees with no qualifications has fallen dramatically, from 26 per cent in 1993 to just eight per cent in 2013. The number of employees with degrees has risen from seven per cent to 16 per cent over the same period.

 

  1. 4.     Investment in research and development is propelling UK manufacturing growth

Over 70 per cent of total research and development investment in the UK was linked to manufacturing, despite the sector making up just 10 per cent of the overall economy. in computer equipment and the pharmaceutical sector has been particularly strong, according to the figures.

 

  1. 5.     Older members of the manufacturing workforce are the most productive

While they may have once been considered ‘over the hill’, 30 per cent of manufacturing workers are now aged 50 or over, compared to 20 per cent in 1993. This is offset by a fall in workers aged 16 to 29. More experienced workers are ‘generally associated with higher productivity’, says the ONS.

 

  1. 6.     Technological advancement has saved manufacturing

Not only are our workers now significantly better skilled, more experienced and more educated, they have the access and knowledge to take advantage of technological improvements, leading to more efficient and innovative ways of communicating.

 

  1. 7.     Globalisation has been good for UK manufacturing

Integration of the global economy has also contributed to productivity growth. The ONS believes this is because ‘it allows the UK manufacturing industry to specialise in producing goods for which they have a lower opportunity cost and are therefore more efficient’.

 

  1. 8.     The North West is at the heart of UK manufacturing

While we in the North West have known this all along, the figures confirm the region contributed the most to UK manufacturing turnover in 2012, representing 14.1pc of total revenue. Aerospace, automotive, chemicals and electrical equipment are key sectors, though all sub sectors are performing well.

 

  1. 9.     America is our biggest export market

The United States purchased £40bn of UK goods in 2013, with manufactured goods comprising 80.7pc of this total.

 

  1. 10.  Outsourcing has led to increased productivity

Of course, I have saved the best to last. The ONS research suggests that the outsourcing of some administrative roles and support services performed by staff from manufacturing firms, such as accountancy, has allowed manufacturing firms to increase productivity by focusing on what they do best.

 

For further information, please contact Ginni Cooper.

 

Manufacturing experts back call for ‘Demand-Led’ education

Chiks has given its backing to a ‘Manifesto for Manufacturing’ which calls for radical changes to the education system to boost skills.

 

The report, compiled by the Manufacturing Group at MHA, the national association of independent accountants, calls on government to move towards ‘demand-led education’ to help the sector bridge the current skills gap.

 

Businesses contributing to the report recommendations believe secondary and tertiary education needs to be re-focused away from ‘abstract academic targets’ towards skills needed by employers.

 

The recommendations in the report, which will be sent to politicians of every political persuasion ahead of the 2015 election, are designed to put the case for increasing the support given to the manufacturing and engineering sector by whichever party forms the next government.

 

Ginni Cooper, head of the manufacturing team at Chiks, which is one of nine MHA members, said: “The UK has made some significant steps in re-establishing manufacturing as a mainstream economic activity, but unless our schools, colleges and universities start to produce young people in large numbers with the skills and motivation to become engineers and technicians, our ability to compete in the global market will be severely limited.

 

“Demand-led education is an obvious way to help achieve this. Instead of targeting our schools to achieve abstract academic targets we should as a nation, look at what we need by way of a future workforce and challenge our schools to meet that need. In simple terms, it’s about educating our young people in the skills which employers want now, and in the future.”

 

The report also recommends changes to the tax system to encourage investment and innovation as well as a more consistent delivery of government support across the UK to encourage things such as exports and re-shoring of production into the UK.

 

 

MHA Manufacturing Manifesto

The Manufacturing Group at MHA also seeks to engage and influence where
there are challenges and opportunities facing the sector, working with industry
and governmental bodies to promote manufacturing and engineering in the UK.
Participants in this roundtable included manufacturing and engineering
businesses, together with advisers and facilitators specialising in the sector
from England, Scotland and Wales.
The aim of the roundtable is to influence all of the major political parties as they
formulate policy heading into the UK General Election in 2015.

SME manufacturers embracing growth strategies

An annual survey of UK manufacturers, supported by accountancy firm Chiks, shows a growing willingness to plan for long term growth.

 

The latest SME Manufacturing Survey from MHA, the UK-wide group of accountancy and business advisory firms, paints a picture among manufacturers of growing optimism, supported by continuing investment in R&D and capital expenditure and an increase in recruitment, including a 13 per cent rise in those planning to take on apprentices.

 

Encouragingly 92 per cent of manufacturers surveyed said they were proactively planning for long-term growth.

 

However, despite nine in every 10 small and medium-sized manufacturers predicting growth in the next 12-months, more than half of these businesses still feel unable to pass on any increased costs to customers.

 

The survey also highlights that more than a third (36 per cent) of the same businesses are unsure how they will meet the upcoming cost of pension auto-enrolment. Six in 10 also say that ‘red-tape’ is getting worse, despite government pledges to reduce regulation.  Energy costs also remain a major issue.

 

Survey highlights:

 

– Optimism among manufacturers is high, with 92 per cent predicting growth over the next 12 months – almost half of these anticipate an increase of over 10 per cent.
– Almost six in 10 companies feel unable to pass on cost increases to customers, reflecting a cautious approach to economic recovery and continuing concern over pricing.

 

– 59 per cent expect to see an increase in staff numbers in 2014 and 64 per cent of companies intend to take on apprentices or trainees. However, there are calls for an ‘Industry to Education’ initiative to address the predicted shortage of engineering graduates.

 

– 86 per cent of companies intend to invest in R&D this year. Of those who applied for the R&D Tax Credit Scheme in the last 12 months, no respondents reported an unsuccessful outcome to their claim.
– Africa is growing in popularity as a destination for export and trade, increasing from 23 per cent last year to 33 per cent in 2014, but there are worries over sourcing local distributors and managing the regulatory and tax environment.
– 36 per cent of respondents are concerned about meeting the future cost of pension auto-enrolment and its impact on their competitiveness.

 

Ginni Cooper, head of the manufacturing team at Chiks, one of nine MHA members, said: “The underlying trend is very positive for those small and medium-sized businesses operating in the manufacturing sector. It’s possible that many had to restructure during the economic downturn and now they are reaping the benefits of improved productivity. For the time being most are looking to absorb any cost increases rather than passing them on, however, this is unlikely to be a sustainable option for the long term.”

 

One area of increasing concern is the availability of motivated recruits, skilled engineers and graduates. While apprentice recruitment is due to increase among 64 per cent of companies, the shortage of skilled and experienced engineers – and graduates – is becoming an increasing challenge, with 65 per cent of companies experiencing problems.

 

Ginni added: “While the trading environment is showing positive improvement – with the increased R&D support, the £7bn package to cut energy bills and the increases in the Annual Investment Allowance in the Budget particularly welcome – there are still many immediate challenges for our SME manufacturers, particularly around energy prices, increasing regulation and the costs associated with auto-enrolment.

 

“We also need to get to grips once and for all with motivating our young people to consider a career in engineering and manufacturing which has to start by target setting at secondary school level which pump primes the whole system. Failing to grasp this nettle will mean that the manufacturing renaissance the UK need will be strangled at birth and the competitive ability of UK manufacturers looking to trade around the world will be seriously compromised.”

Threats and opportunities for manufacturers in 2014

 

In our latest manufacturing blog Ginni Cooper, head of Chiks’s manufacturing team, answers our questions about what the rest of the year has in store for North West manufacturers.

 

After so many false dawns, is the widely-vaunted recovery really under way and, if so, are North West manufacturers well placed to take advantage?

 

All the regional business surveys are pointing towards growth and optimism among manufacturers and this would appear to be backed up by official statistics from government and industry bodies. That said these are still uncertain times with manufacturers prone to instability in export markets and rising input costs, particularly energy, creating risks.

 

In Lancashire manufacturers have benefited from government support in the shape of the Regional Growth Fund and there are the opportunities that the Enterprise Zone will hopefully bring, though it may be some time before these are realised. Those businesses that have invested wisely, retained skills and have a clear growth strategy will be best placed to take advantage of the recovery.

 

Where are the key opportunities in 2014 and what are the commercial and economic drivers?

 

In an economic context, there are some signs that the eurozone debt crisis is easing which is better news for those manufacturers with European export markets, though there is still a long way to go. The BRIC economies and the much-trumpeted emerging MINT (Mexico, Indonesia, Nigeria and Turkey) economies look likely to provide growth opportunities, as well as a host of other foreign markets. However, businesses shouldn’t ignore the established export markets closer to home that are still providing opportunities.

 

Looking at other opportunities, there’s perhaps never been a better time for manufacturers to invest in research and development with generous R&D tax allowances available for qualifying businesses. There’s also a window of opportunity for manufacturers to take advantage of the £250,000 annual investment allowance before it is due to revert back to £25,000 at the end of this year. From this point of view it is essential that businesses make the most of the potential tax savings on offer, by timing capital expenditure on plant and machinery wisely.

 

The government’s pledge to boost apprenticeships and recent measures to cut employer NIC on new jobs will also be looked on favourably for those employers looking to recruit.

 

What are the challenges and constraints?

 

The biggest challenge in any upturn is managing cashflow. Overtrading is a common ailment for manufacturers, particularly those that have capital intensive manufacturing methods and the need to invest heavily in raw materials. Manufacturers need to be disciplined with cashflow projections, credit terms and stock control to avoid the danger of overtrading.

 

Having flexibility in funding streams will also be vital for manufacturing businesses looking to exploit growth opportunities. For those lacking cash reserves, success will hinge on the strength of relationships with existing or potential funders and conversations with advisers need to take place early to determine funding requirements.

 

What has the last 12-months been like for Chiks’s manufacturing clients and how do you see the next six months?

 

Our manufacturing clients are telling us positive stories. The vast majority are well placed for growth with some having invested in new premises, plant and machinery. Our advice for clients is to base investment decisions on conditions in their own business and sub-sector, without getting too distracted by macro-economics.

 

In the next 12-months many clients will have to deal with the cost of implementing and administering auto-enrolment pensions, which we are helping them with. Energy prices continue to give cause for concern and we have some clients beginning to look at ways of reducing energy costs through investment in more efficient lighting, motors, and heating systems, many of which qualify for tax relief under the enhanced capital allowances (ECA) scheme.

Autumn Statement 2013: Reduce energy costs for manufacturers

 

As part of our preview of Autumn Statement 2013, Ginni Cooper, corporate services director at Chiks, offers her thoughts on what government can do to help manufacturing and engineering businesses. I would tend to agree with the EEF’s recent call for the chancellor to reduce energy costs for businesses; though achieving this through scrapping green levies is always going to be controversial.

 

That said energy prices in the UK are rising much faster than elsewhere in Europe, which is squeezing margins and putting UK manufacturers at a competitive disadvantage to their counterparts on the continent.

 

Energy prices have become a politically charged issue in recent months, following Labour’s plans to force energy companies to freeze bills, David Cameron’s alleged comments about ‘cutting the green crap’, and recent price rises announced by the big energy companies. This could make it more likely that we some form of action taken to reduce energy costs.

 

Elsewhere, I’d like to see more investment announced for developing engineering and manufacturing skills. Much has been made of the trend for UK businesses re-shoring their manufacturing operations and supply chain, but for this to continue we need to have the right skills here.

 

Finally, I’d like the chancellor give a clear indication of what is going to happen with the Annual Investment Allowance post 2014. The finite window of two years for businesses to take advantage of the increase in the AIA from £25,000 to £250,000 was clearly aimed at boosting growth in the short-term, but now the recovery has taken hold we need to enable better long-term investment planning.

 

Five questions to answer before re-shoring

The trend for manufacturing businesses bringing production back to the UK has emerged strongly over the last 12 months.

 

A number of high-profile manufacturers – including Topshop, River Island, Aston Martin, Bathrooms.com and Motorola – have either already brought some production back to the UK, or have openly said they are considering it.

 

A similar trend is happening in the US market, with global firms like Apple announcing its intention to bring some Mac manufacturing jobs back from China, and General Electric which added 10,000 jobs by re-shoring some of its production in 2011.

 

This trend for re-shoring is being driven mainly by soaring transport costs and rising living standards, and hence wages, in foreign markets that have until now provided a valuable source of cheap labour.

 

The age of ‘mass customisation’ – making products to the liking of customers in different markets – has also meant companies gain more value by having factories closer to their markets and R&D facilities.

 

Other valuable benefits include better control of the manufacturing process, better lead-times, dealing with suppliers in the same time-zone who speak the same language and better relationships with customers who value a British seal of approval.

 

This is all good news for British jobs. More than half of senior UK manufacturing decision makers questioned in a survey by Business Birmingham and YouGov (July 2013) say they plan to boost production capacity in the UK in the next five years.

 

However, re-shoring isn’t a decision that should be taken lightly. There are complex issues to consider and important questions to answer first. These include:

 

What is driving my business’ need for re-shoring?

 

It’s important to review the reasons for the decision to off-shore in the first place. Was this merely driven by labour costs, or were other factors, such as logistics, inventory levels, quality, exchange rates and responsiveness, also playing a role in the decision. Answering these questions again will give you clarity on exactly why you feel the need to re-shore. It may even be the case that those original reasons for outsourcing still hold true, but a bad supplier experience has put doubt in your mind. Finding a different supplier may be a better solution than re-shoring.

 

Will our circumstances changes again in the future?

 

It’s quite possible that the factors that have changed since the original outsourcing decision was made could reverse again in the near future. Re-shoring may bring production closer to existing markets, but does it move it further away from new emerging markets.

 

Do the right skills still exist in the domestic market?

 

Large scale off-shoring means many skilled jobs have been lost to lower cost overseas markets. Consequently, there are potential skills and knowledge gaps in many areas of the UK. Any decision to bring production back should consider whether you can pick a supplier that has the right skills to meet the needs of your business. Can the supplier handle the product and knowledge transfer process?

 

How can I ensure a successful transfer?

 

What contingency plans can be put in place with the new supplier to ensure a successful transfer, particularly in light of the potential for having an incumbent supplier who becomes uncooperative because they’re losing the contract. Ask yourself how continuity of supply can be guaranteed, perhaps through building up stock inventory to cover the transfer period, particularly if important equipment has to be moved, or whether there will need to be some parallel production.

 

What are the longer term commercial and contractual issues?

 

Re-shoring needs a robust strategic plan attached to it that looks at the long term, not just the fluctuating short-term conditions. The risks attached to re-shoring are equal to, if not greater, than those of off-shoring, so it requires significant time, effort and resource. Consider carefully the financial, legal and logistical implications.

 

Ginni Cooper is head of the manufacturing team at Chiks, for more information please call 01772 821021

 

Top six tips for avoiding the pitfalls of trading abroad

 

The export market can be highly profitable for manufacturing businesses – but there are pitfalls for first-time exporters. Here are some tips on how they can be avoided.

 

1. Carry out thorough research to identify prospective markets – but beware of spreading your resources too thinly. Decide on a single country that best suits your business and take one market at a time.

 

2. Managing cashflow is especially important for exporters. Lengthy transit times and extended credit terms can pressurise your finances. Ask your bank about letters of credit and invoice finance, which generates immediate funding through your sales ledger.

 

3. Failing to address legal and compliance issues can result in major costs and lost trading opportunities. Speak to a commercial law firm about how best to handle import restrictions, regulatory issues and sales contracts.

 

4. Find out whether you can sell your product as it is, or if modifications are needed to make it acceptable to different cultures and regulations. This means looking into packaging, labelling, quality and safety standards.

 

5. Don’t fail because of ignorance. Taking a first-hand look gives you a valuable feel for market conditions on the ground, so factor in a travel budget. You may need to fly out more than once to establish an effective trading presence.

 

6. Take the time to get your paperwork right. The Export Control Organisation (ECO) has to return half of all export licence applications, either for more information or because the application has been incorrectly completed.

 

Ginni Cooper is head of the manufacturing team at Chiks and is available to discuss this matter further on 01772 821021.

Manufacturing Growth Programme has expertise to deliver

 

The Manufacturing Institute’s £2.4m Growth Programme received a recent boost when a team of senior business figures were appointed to lead it.

 

With names like Mike Innes (former MD of Money Controls), Nigel Blenkinsop (Jaguar Land Rover), Frank Hayden (former group MD of Rolls-Royce), Vanda Murrary (Manchester Airport Group), Matthew Kimpton-Smith (group MD of Cygnet Group) and Jim Sumner (former chief executive of Optare Group) on the panel, SMEs using the programme certainly have something to aspire to.

 

The scheme aims to help North West manufacturing SMEs find and develop growth opportunities in their businesses. It will develop the skills of 900 manufacturers through leadership and management masterclasses and company-specific coaching.

 

I’m personally very pleased with this focus on coaching and leadership development. Too often, business support schemes throw money at problems but lack the expertise to deliver tangible benefits.

 

In a sector that is driving economic recovery, many of our manufacturing clients are telling us that they are hungry for growth. They are developing growth strategies, looking for new export markets, improving processes and researching new products.

 

We have been advising manufacturing clients in all of these areas. We know manufacturing SMEs are craving this advice and that’s why the Growth Programme, and the opportunity to hear from people who have been there and done it has to be seen as a good thing.

 

The Growth Programme’s masterclasses are designed to help manufacturing businesses:

 

– Improve productivity and profitability through customer focussed processes

 

– Pinpoint new market opportunities

 

– Create and drive a clear and compelling vision for your business

 

– Engage and lead your team to deliver your growth plan

 

– Increase staff motivation, teamwork and morale and reduce staff turnover

 

– Introduce quicker ways to improve products, services and processes

 

The Growth Programme has been made possible through investment by the Manufacturing Institute alongside cash from the European Regional Development Fund.

 

To find out more, call The Manufacturing Institute on 0161 8752525 or visit

 

 

Ginni Cooper is head of the manufacturing team at Chiks

Budget 2013: Encouragement for manufacturing sector

 

Before the chancellor rose to his feet at the dispatch box yesterday, my wish list blog had called on him to the ease the burden on manufacturers.

 

It seems that my wishes have, in part, been answered as I think most manufacturers would regard the 2013 Budget as being another step in the right direction.

 

The message coming loud and clear from George Osborne was that he wants Britain to be seen by UK plc, and the wider international community, as a place to invest. And despite being a fiscally neutral budget, new measures were announced that will provide encouragement to manufacturing firms.

 

Breaking down barriers to recruitment

 

While the cut in corporation tax to 20 per cent from 2015 was widely expected, the chancellor also addressed one of the biggest burdens to recruitment for manufacturing businesses by offering to pay the first £2,000 of an employer’s NICs, regardless of business size.

 

The corporation tax cut places the UK at the top of the league for mainstream tax rates within the G7 countries and will help manufacturers compete more evenly with established low tax countries.

 

For new companies, the 2013 Budget confirmed the partial extension of the ‘CGT holiday’ within the Seed Enterprise Investment Scheme, which has been a catalyst for investment start-ups.

 

Further tax reliefs announced

 

The Budget also confirmed some minor changes to the final proposed forms of a number of tax reliefs which go live from 1 April 2013 including the ‘Above the Line’ R&D tax relief and the Creative Sector Tax Reliefs.

 

It’s worth taking another look at the generous range of tax reliefs the UK now has which can substantially reduce the cost of new product development:

 

– A Patent Box which reduces the tax rate charged on a broad range of income derived from patents to 10 per cent.

 

– R&D Tax Reliefs on qualifying expenditure incurred for SMEs at 225 per cent and large companies at 130 per cent.

 

– R&D Tax Credits for both loss making SMEs and also loss making large companies who can now receive a credit based equivalent to 10 per cent of their “above the line” R&D expenditure.

 

The Budget also confirmed the short term increase in the Annual Investment Allowance to £250,000 for each of the 2013 and 2014 calendar years.

 

Welcome commitments were also made to increase the access to funding for SMEs through the UK’s new Business Bank and an additional £300m investment funding programme. The Business Bank was one of the things I really wanted to see move forward because, so far, it would be hard to argue that the Funding for Lending scheme has delivered any tangible funding benefits to manufacturers.

 

Ginni Cooper is head of Chiks’s manufacturing team

Budget 2013: Deliver targeted support for firms with export potential

 

As part of a series of blogs previewing Budget 2013, Chiks partner Damian Walmsley offers his thoughts on what the chancellor could do to help businesses that trade internationally.

 

The main thing for the chancellor to get right on this occasion is to be convincing. Following last year’s uncertainty, it mustn’t appear rushed or haphazard.

 

He has looked rather foolish after the amount of back tracking he has had to do on VAT on caravans and the pasty tax, and it sometimes looks as though an idea comes up at the end and then he needs to find the funds to pay for it.

 

There is all the more danger of this happening this time around because of political posturing as we move towards the final third of the government’s term and political opponents look to exploit any signs of cracks in the coalition.

 

From an international trade point of view, I’d like to see the chancellor encourage more businesses to consider selling overseas and so he needs to come up with incentives to assist businesses with export potential. This is critical given the state of the UK economy.

 

This could involve making improvements to initiatives like the export enterprise finance guarantee scheme, which has only been used by a handful of businesses according to recent figures, or by ensuring regional growth money is better targeted at those businesses that can deliver growth and create jobs.

 

He also needs to encourage more international businesses to trade over here and pay UK tax rather than overseas.

 

We kind of already know what will happen next year as he has already announced many of the measures that will take effect, either last year or in the Autumn Statement, so a lot of what he will announce will be for 2014/15.

Access to finance for SME manufacturers

 

In the fifth of a series of blogs looking at the manufacturing sector, Chiks’s Ginni Cooper discusses access to finance for manufacturers.

 

Access to affordable finance continues to frustrate ambitious SME manufacturers. Only 40 per cent of small businesses used external finance in the third quarter of 2012, according to the SME Finance Monitor report, compared with 51 per cent in the previous quarter.

 

So what funding options are open to growing SME manufacturers?

 

Government-backed schemes

 

A government-funded small business bank was announced in September with the aim of enabling small firms to access finance. This bank would operate through the wholesale market to support loans and long-term capital investments for small businesses from existing banks and fund providers.

 

Another funding initiative is the Treasury’s Funding For Lending Scheme, run in partnership with the Bank of England. This was set up in July to increase SME business lending by allowing banks and building societies borrow from the Bank of England for up to four years.

 

Debt funding

 

Debt funding packages may be more affordable following the latest raft of measures aimed at smaller businesses. To obtain this type of funding, you must demonstrate strong cash flows to convince the bank you can service the loan.

 

Invoice discounting and stock finance

 

Invoice discounting is readily available and ideal for established growing businesses because it links your sales ledger directly to your credit facility, so funding grows in direct proportion to business expansion.

 

Private equity and venture capital

 

PE and VC funders become an investor in your business. This means they take a share of the profits, which arguably makes it expensive. PE/VC funds are available, but you must have very strong growth prospects. Businesses can flourish as a result of the strategic expertise that PE/VC funders bring.

 

Alternative funding

 

Alternative funding includes Lancashire County Council’s Rosebud Fund; business angels; and the North West Fund. Another source is peer to peer lending, which matches business and individuals who want to invest with businesses looking to borrow. Alternative funding can be useful for topping up funding needs, but it’s by no means straightforward, especially where public funds are involved.

 

Your professional advisor will be able to give you more information on the funding options available to your business.

 

For more information, contact Ginni Cooper on 01772 821021.

Shop floor to CEO: Succession planning for manufacturers

 

In the fourth of a series of blogs looking at the manufacturing sector, Chiks’s Ginni Cooper offers advice for identifying and grooming the next generation of leaders.

 

Management buy-outs (MBOs) are popular among owner-managers of manufacturing firms who want to pass on what they have built to people they know and can trust.

 

MBOs enable retiring owners to get the personal satisfaction of knowing the ethos of their business will be preserved, while rewarding the people who have played a major part in its success.

 

This means it is essential to ‘home-grow’ a management team capable of running the businesses, which in turn means promoting your best people from the shop floor.

 

The right skills

 

Identifying individuals with management potential is not straightforward. Technical abilities are rightly given a high priority in the manufacturing industry, although owners should place equal store by   leadership qualities, commercial awareness, and organisational skills.

 

Nor should owners underestimate the challenges faced by MBO team members who were previously ‘one of the lads’ or ‘one of the girls’. This perception can’t be shaken off overnight and it is essential to give promoted individuals sufficient time to gain the leadership qualities they need and readjust their relationships with former shop floor colleagues.

 

Mentoring future leaders

 

The grooming of future managers, and eventual owners, is a long term process that requires careful thought and investment. Managerial candidates can acquire the self-confidence, technical skills and leadership capabilities through a range of options.

 

In-house mentoring sessions involving the owner and promoted managers are an effective way of passing on the commercial savvy needed to take the helm. However, sometimes external input is needed and business coaching consultants across the region offer one-on-one programmes tailored to the development needs of individuals.

 

Addressing gaps in academic success

 

In addition, foundation degrees, HNDs and HNCs in business management are available from numerous regional educational institutions and special care is taken to make the process accessible to budding managers with limited academic experience.

 

Ultimately, the strength of your management team will play a key role the decision-making process of a potential MBO investor – the stronger your managers, the greater the value of your business.

 

For more information, contact Ginni Cooper on 01772 821021.

Top six considerations for exporters

 

In the third of a series of blogs looking at the manufacturing sector, Chiks’s Ginni Cooper gives her top tips for boosting export growth.

 

British credentials still represent a significant competitive advantage in the global marketplace. Here we discuss five key issues to help SME manufacturers make the most of the export trade.

 

1. Get sound advice. The government’s UK Trade & Investment team offers SMEs valuable support and information on overseas markets, including trade missions. Whether you are a seasoned exporter or simply want to find out more about international trading, UKTI are go-to people.

 

2. Don’t let cashflow suffer. The period between despatching your goods and getting paid is longer in the export trade than domestic markets. This often puts pressure on cashflow, so use letters of credit to ensure payment. In some cases you may need to request cleared funds before shipment, particularly with new customers in high-risk economies.

3. Be sure of your product’s performance in new markets. It’s worth investing in test equipment to evaluate the effect of different climatic conditions on your product. The saying that you rarely get a second chance to correct a poor first impression is especially true of export markets.

 

4. Research new markets thoroughly. Desktop research can be used to cost-effectively identify the most suitable markets for your product. This can save thousands of pounds on travelling to potential trading territories and enable you to focus on the right sized export market in a geographical location that suits your product and exporting experience.

 

5. Understand the culture. It’s crucial to understand and respect the culture of the countries you are exporting to. Investing time in learning forms of greetings and business etiquette will generate handsome returns as you build relationships and develop trading networks.

 

6. Get the right legal advice. If at all possible, ensure your contracts are under British legal jurisdiction. This is a major advantage if you face litigation. Regardless of jurisdiction, you should take professional advice from a commercial law firm before signing any contracts.

 

For more information, contact Ginni Cooper on 01772 821021.

Tax breaks mean substantial savings for manufacturers

 

In the second of a series of blogs looking at the manufacturing sector, Chiks’s Ginni Cooper outlines some of the tax breaks manufacturers can take advantage of.

 

Businesses should make the most of the government’s decision to increase the annual investment allowance (AIA) as well as generous tax breaks under the research and development (R&D) tax credits scheme.

 

AIA in a nutshell

 

The AIA is a capital allowance that gives tax relief at 100 per cent on qualifying expenditure in the year of purchase. It enables businesses to deduct up to £250,000 from their taxable profits.

 

The increase to the AIA represents an opportunity for businesses to invest tax efficiently, giving them the chance to save up to 50p in taxable profits for every £1 they invest in new equipment.

 

You are eligible for AIA if your business activity includes: trading; commercial property letting; office or employment; or leasing.

 

Companies with a group structure need to consider tax planning options to determine the most effective way of dividing the allowance between businesses. Also, assets such as cars do not qualify.

 

Investment in sustainable technology is eligible for enhanced capital allowances (ECAs), which are on top of the £250,000 allowance. As with the AIA, 100 per cent tax relief is available in the first year.

 

What you need to know about R&D tax relief

 

Research and development (R&D) tax relief and credits is a government incentive to encourage firms to invest in R&D.

 

Claims can be made by businesses across a wide range of sectors including: manufacturing; food processing; engineering; construction; automotive; and pharmaceutical.

 

R&D need not be technology-based and includes a raft of business activity. For example, if you are a food producer, investing in the development of an ingredient to extend the shelf-life of a product constitutes R&D activity.

 

Relief rates are as high as 225 per cent for claims after 1 April 2012. In addition, SMEs may choose to trade in their R&D losses and receive up to 25p for each £1 spent on qualifying R&D. 100 per cent allowances are also available on R&D capital expenditure.

 

For more information, contact Ginni Cooper on 01772 821021

Growing a manufacturing businesses

 

In the first of a series of blogs looking at the manufacturing sector, Chiks’s Ginni Cooper offers advice on how to grow a manufacturing businesses.

 

After a long, bleak period of economic stagnation, SME manufacturers have an opportunity to grow their top-line and extend their markets.

 

With the financial turmoil in eurozone countries, the regional manufacturing sector is well placed to generate expansion. Here are some of the key ways forward.

 

The importance of strategic planning

 

A clear strategic direction is essential to success. Preparing a professional business plan will enable you to reap rewards going forward by effectively positioning your business in the market and getting your product offer spot on.

 

Relocating to suit your commercial needs

 

The availability of commercial property means rentals are significantly cheaper now than they were a few years ago. This means now is a good time to expand or relocate to premises that better reflect your commercial activities. Competitive pricing means manufacturers can also drive down costs and boost their bottom line.

 

Export markets are a growth platform

 

One thing the government has got right is the need for greater numbers of British manufacturers to enter the export markets. Many businesses have enjoyed success in emerging markets, but EU countries such as Ireland, Denmark and Holland are ideal for manufacturers new to international trade. Speak to UK Trade & Investment to find out more.

 

Success to the brave

 

Investment in new machinery and tooling may be necessary to expand into fresh markets. While there is an understandable reluctance among manufacturers to invest, it is the forward-thinking firms that will ultimately prosper when the recovery cycle begins to gather pace – as it inevitably will.

 

Embracing e-commerce will pay dividends

 

Upgrading your website and harnessing the marketing power of social media can drive growth and open up fresh markets. This doesn’t involve major investment and a professional approach will enable you to reach a much broader range of customers and suppliers.

 

For further information, contact Ginni Cooper on 01772 821021.

Outlook for 2013: Consider exports to achieve growth

 

Damian Walmsley, partner at Chiks, gives his thoughts on 2013.

 

Over the next 12-months we can expect the economy to remain largely flat with any growth being weak and prolonged. This is certainly the expectation of the Bank of England which recently revised down its own growth forecast from close to two per cent to one per cent.

 

We need to avoid any major surprises that can affect business confidence, such as a break-up of the Eurozone. The problems in several European countries are well documented and there are signs that the growth of the German economy, which in many ways has sustained the wider European economy, is beginning to slow down.

 

However, I’m confident we will avoid any major crisis scenarios. Growth can happen if individual businesses have focus and do not allow themselves to be distracted by events elsewhere.

 

I think 2013 can be a good year for British exports and manufacturing, notwithstanding the problems in the Eurozone, and I would encourage businesses to be looking at export opportunities to beat stagnation in the domestic market.

 

While Europe remains one of our biggest trading partners, the emerging economies, such as Brazil, Russia, India and China, together with more established markets such as North America, are providing excellent growth opportunities. Even within Europe, some of the Scandinavian countries are providing good opportunities.

 

Businesses need to identify how they can tap into these markets and my advice is to speak to UK Trade & Investment (UKTI) to get more guidance.

 

My other piece of advice to businesses, regardless of sector, is just to stay positive, even when times are very tough. There are always going to difficult periods in business, and with each day that passes we’re getting further away from the bad times and, hopefully, closer to the better times.

 

What can be done to boost the manufacturing sector?

 

Manufacturers are calling for a government-backed autumn of action on business growth – and they have put forward some compelling arguments.

 

The industry group believes removing barriers to investment and expansion should be pivotal to government policy. The call to action follows Lord Heseltine’s independent review of how government departments deliver growth policies and financial support.

 

Removing hurdles to growth

 

The says the review should spur the government to remove hurdles facing dynamic companies that can drive sustained growth through trade and investment.

 

It wants to see action to deliver funding, a ‘systematic attack’ on the cost and regulatory burden on businesses and improve export support services to manufacturers aiming to enter new markets.

 

Terry Scuoler, chief executive of EEF describes the Heseltine Review as welcome recognition that all parts of government must back companies aiming to expand to create a more prosperous economy.

 

Manufacturers will also applaud the review’s opinion that support for exports needs to be better resourced and more accessible. In addition, the report advances some thought-provoking views on how business can play a greater role in influencing the way government budgets are spent and how business support is delivered.

 

Making it easier to take on new employees

 

The report chimes with Chiks’s research with SMEs which found that cutting the rate of employer National Insurance contributions would stimulate businesses and the economy. Our online survey found that 40 per cent of business owners would prefer a cut in the rate of employer NICs to other tax cuts because they believe lower NICs would encourage businesses to create new jobs at a time when company finances are stretched.

 

The report also reflects our conviction that growth simply won’t happen on its own. Something needs to be done to galvanise investment, invigorate entrepreneurial activity, and activate job creation.

 

Lord Heseltine has produced insightful analysis of how we can generate a more competitive economy. His report provides some useful ammunition and it is now for the government to look into ways of firing it.

 

Vital signs of growth for Lancashire businesses

 

– Businesses seeing an increase in domestic sales
– Lancashire firms showing prudency with investment plans
– Intention to recruit is improving
– Manufacturers looking outside Europe for export opportunities

 

Lancashire’s manufacturing firms have continued to build on the optimism shown at the end of 2011, according to the latest Quarterly Economic Survey compiled by the North & Western Lancashire Chamber of Commerce, in association with Chiks Chartered Accountants and Business Advisors.

 

Results for the first three months of the year show that 50% of manufacturing firms have seen an increase in UK sales, compared with 34% of service sector businesses.  There was also an increase in the number of manufacturing companies expecting profitability and turnover to improve in the three months ahead, showing a slow return in business confidence.

 

Although there was positive news domestically, Lancashire’s exporters had mixed results this quarter.  Despite a 5% increase in manufacturers reporting increased sales abroad, the same sector saw a 10% rise in firms experiencing declining export sales.  This pattern was repeated in service industries.

 

Encouragingly, the businesses surveyed appear to recognise lower growth in European markets and are looking further afield for export opportunities. The Middle East (53%), the BRIC markets of Brazil, Russia, India and China (38%), the Far East (36%) and North and Central America (32%) were among the markets that companies were considering selling to over the next three months.

 

Employment in both sectors remained weak with fewer firms attempting to recruit staff in the first part of the year, although the prospects for the next quarter look more positive with fewer firms anticipating job cuts. The survey also revealed that nearly a third of all businesses expected to increase prices over the next three months, citing raw material costs as the most significant factor.

 

Commenting on the results, Steven Broomhead, Chair of the Lancashire Economic Commission said:

 

“There is evidence that business conditions are improving and that confidence is slowly creeping back. However, there is still an element of prudence as firms continue to hold back on their investment plans amidst uncertainty over rising business costs, not least of which is the increase in business rates set for April.

 

“Whilst the signs are encouraging for manufacturers, there is cause for concern in the service sector as consumer demand remains weak. The Government must look at ways of stimulating the economy whilst continuing to reduce the budget deficit.”

 

Stephen Gregson, corporate finance director at Chiks Chartered Accountants, a partner of the Quarterly Economic Survey, added: “The first quarter of any year is always tough, so it is encouraging to see businesses gritting their teeth and getting on with it despite the challenging economic conditions of recent months.

 

“The fact that businesses remain optimistic is a heartening sign and workforces appear to be stabilising with many of the companies surveyed intending to recruit staff in the next few months. Businesses are right to maintain a prudent approach though, particularly when it comes to monitoring cash flow. However, with inflation falling back and interest rates remaining low, businesses should begin to feel more comfortable about future investment”

 

 

For further information, contact: Alan Welsh on 01772 653000 or email [email protected]