Earlier this year the chancellor announced that he would offer support to the manufacturing sector this autumn. However, manufacturing trade bodies such as Make UK have said that support is needed before the summer parliamentary recess. Make UK has given the government several support recommendations, including reducing or waiving business rates for 12 months and re-considering the effectiveness of the coronavirus business loan schemes.
In this article, we discuss some of the reasons why the manufacturing sector is calling for immediate financial support.
Rising energy costs
Firstly, rising energy costs are a considerable issue for manufacturers as it has affected their margins and ability to remain competitive. UK Manufacturing firms tend to use a high amount of energy to operate highly technical equipment to make their products. This has become an increasing concern as over 60% of manufacturers across the UK are now considering whether they should generate their own electricity to cut costs. However, up-front costs of installing a mechanism to generate your own electricity is expensive and during the pandemic many businesses will have used a large amount if not all of their cash reserve. Therefore, some manufacturers may not have the finances to install a mechanism to generate their own electricity without needing a loan. In addition, with further energy price rises coming in October, manufacturers will have a lot to consider when tackling this issue.
Increased cost in raw materials
Increasing raw material costs are becoming a serious challenge for manufacturers as prices for common materials such as steel have reached a record high in 2022 and forecasts suggest that prices will remain elevated throughout the year. This is becoming a key issue for manufacturers as many are looking for solutions to optimise costs in order to remain competitive and maintain profit margins.
High level of vacancies
Job vacancies for manufacturing roles are at a record high with 4.1 vacancies per 100 jobs. This demonstrates that recruiting skilled staff is becoming a challenge. According to government statistics, manufacturing job vacancies increased by 90% between January-March 2020 and November 2021-January 2022. This increase in labour shortages is due to more people being economically inactive across the UK and a decline in foreign workers because of the new immigration rules following the UK’s exit from the European Union. These factors have caused a skills shortage and those manufacturers struggling to recruit will either have to reduce their output or train unqualified staff to fill vacant roles.
How can we help?
At Hawsons we have a dedicated team of manufacturing accountants at our offices in Sheffield, Doncaster and Northampton. Our specialist team offers a wide range of services which are tailored to meet your individual needs. Our understanding of the issues faced by manufacturing businesses means that we can proactively seek out ways for you to maximise your profitability and minimise your tax liabilities.