UK’s Manufacturing Sector to See Sharp Decline in Profits, Sales in 2020-21
According to recent research by consultants Insider Pro, the UK manufacturing sector is likely to face severe challenges owing to a decline in sales, sharp reduction in profits and even tightening in cash flow. The UK Manufacturing Barometer forecasts a decline in operating profits by at least £6.3 billion in 2020-21 while pre-tax profits could fall by £7 billion to £6.5 billion.
The research that spans nearly 1,500 small and medium-sized manufacturing businesses across the UK and employs around 2.7 million workers reveals that the sector posted a decent growth in revenue until 2018-19, which then began to falter by 2019-20 due to Brexit-related uncertainties, even before the onset of the coronavirus pandemic. In 2019-20, UK manufacturers’ registered no change in sales YoY, with total sales stalling at £214.8 billion.
According to estimates by Insider Pro, the pandemic and Brexit together are expected to cause a reduction in sales by as much as 10% in a year until March 2021. What is even more worrying is that a sustained tightening in margins, especially among smaller manufacturers, has resulted in a reduction in operating profit despite an uptick in overall sales.
Managing director at Insider Pro, Jeremy Bowley, remarks, “Companies can only grow sustainably, or weather downturns, if they have a firm focus on cash flow. This is much more important than profit in the short term. Companies should tie up as little cash in their business as they can keep consistent with a smooth production and sales process. Running out of cash can sink an otherwise sound business and that’s even more important today.”
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