Post-COVID cash and credit crunch facing UK manufacturing sector

The UK manufacturing industry is facing a combination of a post-COVID credit, cash and costs crunch, a major survey released today says.

The survey, released by Make UK and RSM, shows manufactures are now grappling with the demands of an economic recovery hampered by disrupted supply chains and mounting skills shortages.

This is sparking a sharp inflationary spiral that threatens to reach a level that would provide a tipping point for the business model of many, while companies are also facing a liquidity squeeze as customers and suppliers cling to cash or change their payment terms.

As a result, for almost half of companies, their cash position is worse now than at any point since the pandemic began, with the prospect of having to take on yet more debt to maintain normal operations or provide growth capital.

In response, Make UK is urging government to consider payment holidays for the loans that companies took out as a precautionary measure to provide them with vital breathing space.

The uncertain trading environment and level of risk is also forcing companies to use restructuring, insolvency or turnaround professionals as a precaution.

Commenting, James Brougham, senior economist at Make UK, said: “Industry is facing the perfect storm with a raft of rapidly escalating costs combined with significant levels of debt which many companies took on as a precautionary measure just to stay afloat. Given the inflationary spiral shows every sign of continuing to climb, many companies fear a tipping point that could make their business models unviable.”

Mike Thornton, head of manufacturing at RSM UK added: “Manufacturers are facing a variety of headwinds from staff shortages, supply chain disruption, soaring energy prices and an increased debt burden post-Covid. This backdrop has elevated the risk profile for many UK manufacturers. Considering the position today, rapidly implementing plans to address underperformance is going to be crucial to ensure manufacturers emerge post-pandemic in a strong viable position.”

Make UK
www.makeuk.org

Company

Make UK

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