Manufacturers and Brexit uncertainty
The majority of UK manufacturers have been on something of a financial roller coaster during the last two years as they struggle to prepare for an unknown trading environment post-Brexit.
There have been some real highs. The fall in the value of sterling following the Brexit vote in 2016 may have dented national pride but it meant that UK manufactured goods, from knitwear to aircraft engines, were suddenly very much more competitive in practically every export market in the world.
“We were doing ok before Brexit came along. Then the pound fell - that meant everything we made cost less for our overseas customers. Doing ok turned to doing phenomenally in a matter of months.”
Closer to home, the worries about supply chains may have led to a stockpiling boom, as demand for warehousing space rocketed by an unprecedented 32% and order books filled up.
“First we added a mezzanine. Then we started taking space in another unit. Warehouse space was suddenly in short supply.”
But there have been some serious lows too. The business surge that manufacturers enjoyed earlier this year has inevitably been followed by a winding down in orders that is looking horribly like a recession in the making. Almost half of companies report a noticeable negative change in EU markets, as customers and suppliers become less eager to do business because of the continued uncertainty as to the form Brexit will take.
No deal would leave manufacturers facing tariffs on the import of goods but - even more damaging - just-in-time delivery logistics would become impossible, meaning increased inventory costs. Around 60% of businesses believe that they would need to increase product prices as a result.
Plus the challenges may not be over yet.
There may also be problems with finding key staff if freedom of movement is curtailed. Both skilled people and labourers will be in short supply if it is no longer possible to travel to the UK for work – which means many manufacturers will need to make major changes to their production operations.
“We have some very good people from Eastern Europe on the production floor - and in the finance team they all come from outside the UK. I’m worried what will happen if they suddenly all decide to go home.”
There could also be problems with ‘Rules of Origin’ provision. Knowing the origin of a product is essential to ensure the correct rate of duty or tariff can be applied to it when it crosses a border. Customs authorities use the World Trade Organisation (WTO) Rules of Origin criteria to determine the economic nationality of a product.
Post Brexit, UK exporters will have to declare the origin of their goods when trading with the EU. For process manufacturing companies in a variety of sectors – from food and clothing to cars, computing and electronics, or anything that is created in a UK factory - it will need new procedures to deliver full traceability.
It looks as though logistics, staffing and product tracking could all be key challenges for UK manufacturers post Brexit.
This is made all the more acute by coming at a time when keen pricing, flexibility and quality are sure to be essential to secure new markets, and reinforce the position of UK exporters with existing customers.
Fortunately, technology may be ready to provide solutions. As the number of European workers thins ahead of Brexit, forward-thinking manufacturers are already investing in automation and robotics as human workers become more scarce and more costly.
Making the most of the potential of digital technology could solve all the problems triggered by Brexit - and leave manufacturing businesses ready to take on the world.
This, of course, comes not before time. Automating labour-intensive processes could generate major benefits for the UK manufacturing sector. Productivity currently lags more than 20% behind the US, France and Germany. Automation could redress this imbalance.
“People have been banging on about automation for 50 years. Well, it’s here, it works and you can’t run a production business without it.”
But clearly, there is much more to the successful deployment of production automation than simply expecting multi-axis handling robots to take the place of individual workers on an existing production line.
Every aspect of the business operation will need to change. Enterprise resource planning (ERP) solutions have to be seen as central to coordinating robot workflows and enabling the sharing of data between machines and humans across multiple digital platforms, ensuring that logistics as well as the production process itself can be optimised. Capturing data from every process on an automated production line can enhance process flows, and enable a more connected supply chain – as well as improve product quality and throughput and drive down costs.
What about the costs?
Apart from a very few traditional craft-based businesses, there can be very few manufacturers who have not already started harnessing digital technology to reduce costs and drive efficiency in their factories. After the first wary experiments with process control systems, many then go on to discover that automating the back-office processes to eliminate paper documents and replace manual processes with automated workflows is a logical step. One the whole enterprise can benefit from.
“You might think you can’t afford robots on the factory floor. I don’t think you can afford not to have them any more. You need them at the centre of your business if you are going to have a future.”
The post-Brexit world may make it essential to accelerate the process – and that will inevitably mean investment is required.
At Rangewell, we can help manufacturing businesses across all sectors find the funding they need to adopt automation and new digital solutions which will help them to drive down their costs - and make their businesses ready for a post-Brexit world.
We can help source Asset Finance to bring in the equipment you need, Working Capital Funding to help you through the adoption phase - and Invoice Finance solutions to ensure that, once your new production facility is running, you can enjoy the returns with every consignment you ship - as soon as it leaves your factory gates.
To find out what those solutions could mean to you, simply call a Rangewell Industrial Finance Specialist on 020 3318 2613.