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Grant Thornton’s Solent 250 Sector Watch


Challenges and opportunities in manufacturing


The past few years have seen significant changes in the manufacturing sector and despite the continuing fragile economy the strong rebound in the world trade and global demand led to a sharper than expected recovery in the sector which is regularly reporting increased order levels, increased output and increased investment and recruitment.


The manufacturing sector played a dominant role in the economy’s growth through 2010 and its focus on exports and investment will make it a key player in generating more of a balance in the growth of the economy in the coming years. However, it is not just the external environment that will determine whether the pace of the recovery can be sustained in the sector, but importantly it will also depend on manufacturers’ ability to recruit skilled staff and obtain the necessary finance for their investment plans.


EEF, the manufacturers’ organisation predicts that the manufacturing sector will have started 2011 on a relatively stronger footing than it did in 2010. However it forecasts more modest growth of 3.5%


Ones to watch


So how are manufacturing companies in the Solent 250 dealing with these current challenges and opportunities?


Stannah won a contract in January worth more than £2 million per year for three- years covering the supply and installation, maintenance, removal and refurbishment of stairlifts, step lifts and through-the-floor lifts delivering over 800 lifts per year to residents in Glasgow, Dunbartonshire, South Lanarkshire, and Renfrewshire. Stannah’s re-use proposition, introduced to help local authority customers get the most value from their budgets and save millions of pounds by re-using stairlifts, is a model of how firms in the region can adapt to changing customer needs.


Romsey-based Pearce Signs Group, trading within the marketing industry, has made its


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through 2011 in comparison to 2010 although this continues to be stronger than the wider economy.


Confidence among manufacturing firms continued to strengthen in 2010. However there is expected to be a significant impact on confidence during 2011 with 45% of businesses predicting consumer and business confidence will be weakened by government cuts. Approximately 20% of companies expect a direct loss of orders with some, particularly transport manufacturers, predicting a loss of orders from government contracts.


In addition, 40% of


companies expect a loss of orders through their supply chain and 26% are concerned about the cuts to business support and skills programmes, which could exacerbate the skills shortage experienced by the sector over a number of years. On the positive side, 5% of companies see the drive to reduce costs and improve efficiencies as an opportunity to develop business and 17% of companies think the cuts will contribute to a clearer business environment.


Access to finance will be critical to companies as they seek to crystallise their investment plans in 2011. A recent credit conditions survey from the manufacturers’ organisation shows conditions only slowly improving with fewer companies now reporting increasing borrowing costs, despite base rates remaining at the historic low. The increase in demand for finance could put further pressure on the banks, however only modest improvements in the flow of finance are predicted in the short-term. Whilst the limited access to lending facilities remain, manufacturers are likely to continue to find it difficult to meet growth in demand.


Another key challenge for the sector is managing the cost of inputs. During 2010 the average cost of materials for manufacturers increased by 11%. This compares to a restrained increase in output prices of only 3.9% over the same period, putting significant pressure on companies margins. Many companies are expecting to increase their prices during 2011, however this could prove difficult in the current economy where the risk of persistent high inflation is a growing concern and is being closely monitored by the Bank of England.


own promotions all about ’you’, eschewing a traditional marketing platform for a customer-focused approach. With clients ranging from small companies to multi-national corporations, from one-off sites to national and international projects, Pearce’s approach to tailored service delivery enables it to produce high-quality campaigns that meet a wide range of needs.


Naim Audio designs and manufactures the world’s finest high-fidelity audio products. The company achieved substantial year- on-year growth, investing in research and development and building on its strong professional worldwide distribution network. Naim, the winner of the Queen’s Award for Enterprise in 2010, has positioned itself to meet the challenging environment it forecasts for future years.


For more information


about the manufacturing industry in this region and throughout the UK, please contact:


Amanda James 023-8038-1168


amanda.james@uk.gt.com www.grantthornton.co.uk


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – APRIL 2011


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