The number of manufacturing businesses entering insolvency has hit a five-year high rising 7% to 1,466 in the last year (to 30 September 2019) up from 1,373 the previous year, says chartered accountants and business advisors, Moore.
Moore says that the rise in manufacturing businesses going insolvent is being driven in part by Brexit-related uncertainty and a broader slowdown across Europe. UK manufacturing orders fell for the sixth consecutive month in October. In June this year nearly a third of UK manufacturers said they received a lower number of orders than usual.
The report says that the continued lack of clarity on Brexit is causing increased levels of concern about the future financial requirements that companies may require. In the manufacturing sector this has resulted in a rise in the number of UK based customers of these businesses deferring making significant purchases
There are also concerns in the sector that some European manufacturers are looking to cut UK-based manufacturers out of their supply chains in order to guard against the impact of a possible ‘no-deal Brexit’. A no-deal Brexit would see a dramatic increase in the cost of components bought from UK manufacturers by businesses within the EU due to tariffs and shipping delays.
“UK manufacturers should be going through a period of heavy investment in order to close their productivity gap with competitors in places like Germany. Instead many are having to save as much cash as they can to tide them through until order books recover, as banks and other finance houses are indicating that they will be reluctant to provide additional funding to support working capital.”
“Banks are restricting their lending to the sector. At the same time, more and more business owners are less willing to inject the extra equity into their business that is necessary to ensure their survival, for fear of not getting it back. As we get towards a Brexit deal the outlook for manufacturers should become clearer.”
“We continue to hear from our clients that the Government’s guidance has not been up to scratch. There is a lack of detail in the Government advice that means some businesses, particularly smaller businesses, are unable to implement contingency plans.”