Published in An SME Led Recovery, a survey of manufacturing SMEs from across the UK identified growing expectations for cashflow to improve – leading to increased investment by businesses in their operations.

The first in a series of quarterly research reports that will track the sector, An SME Led Recovery details the performance, plans and ambitions of SMEs, highlighting the central role they play in the UK economy.

Cashflow and turnover set to improve

Conducted for Paragon by Opinium, the research found that 51% of manufacturing SMEs predict that their cashflow will improve substantially over the next three months, rising to 56% over the next six months and 60% over the next year. Only 32% of SMEs had seen their cashflow improve over the previous three months.

Similarly, turnover is also set to improve – 52% of businesses reported rising turnover levels during the first quarter of the year, with 50% expecting turnover to improve further during the second quarter, compared to 29% that forecast a fall.

Investment on the increase

Almost half of all manufacturing SMEs (45%) will use the increased cashflow and financing to increase investment in their businesses, with 46% planning to maintain current investment levels and only 7% expected to reduce spending.

Machinery and equipment lead the planned investment of SMEs, with 77% and 76% of all SMEs planning to invest in each respectively.

The renewed investment will also see the number of manufacturing SMEs investing in electric vehicles rise from 15% in the last six months to 45% across the next six – higher than the proportion set to in invest in traditional fuel vehicles.

• Machinery: 40% > 76%
• Equipment: 34% > 77%
• LCVs 7% > 32%
• Recruitment: 22% > 61%
• Electric Vehicles: 15% > 45%
• HGVs: 9% > 37%

SMEs are also planning to boost their operations by increasing their work force, with 39% of businesses planning to recruit over the next six months and 19% planning on reductions.

Confidence strong in business prospects

Manufacturing SMEs expressed confidence in their prospects for their own businesses and the sector in which they operate but were less confident about the macro environment. Over half said they were confident in their own business (55%) and their sector (50%) in the next three months, compared to 9% and 15% respectively that were not confident.

Confidence was less strong in the UK economy, with only 34% of manufacturing SMEs surveyed expressing confidence.

SMEs seek finance

The research also found that 51% of manufacturing SMEs sought additional financing over the last three months, with 65% of those businesses seeking over £100,000.

While 6% of this group received no additional financing, 19% received some of the finance they were seeking, and the remaining 27% received all the financing they sought.

Writing in An SME Led Recovery on the research findings Wayne Hall, Paragon’s manufacturing finance lead, said: “Manufacturing SMEs are confident, investing in new assets and expanding their work forces. Those are the findings of the new report, An SME Led Recovery, published today by Paragon Bank.

“Our sector has enabled industry to innovate, improve, and deliver results for end users – and as the economy recovers from the challenges of recent years, it is manufacturing SMEs that will once again be at forefront of making this happen. Supported by access to asset financing, our sector is ready to play its part.”

He continued: “Specialists in asset financing for manufacturing SMEs, Paragon speaks with businesses daily and is proud to support this vital sector. It is greatly encouraging to see that, after the challenges of recent years, they are ready to take the proactive steps necessary to support our national economic recovery.”

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