The Voice of SME's in Engineering

BANK OF ENGLAND SURVEY RESULTS - MARCH 2017

ENGINEERING INDUSTRIES ASSOCIATION – the voice of SMEs in Engineering

I attended a Bank of England meeting on 23 March 2017 and presented the results of our recent survey among SMEs in Engineering. In comparison with the last survey of 16 September 2016 the following trends are apparent:

This survey is influenced by the Brexit referendum result and the structural changes in Whitehall. In comparison with the last survey the following trends are apparent: 

  • Business Confidence is higher
  • Overall Growth is higher
  • UK Demand is stronger although 60% is still flat
  • Export demand is very much stronger
  • The number of people employed is mostly static
  • The average increase in pay per employee is mainly 0-2% although the 2-4% is increasing
  • There are still skill shortages
  • 60% of survey will increase prices compared with 23% last time
  • Investment intentions are about the same as previously

The factors influencing the results include the following:

  • The significant decline in £sterling has boosted exports. There are signs of increased import costs. At this value of the £ there is a great opportunity for SMEs in the export markets. However the Department of International Trade (DIT) is causing serious problems by delaying the agreement for overseas trade shows under the TAP programme. SMEs are losing their opportunities to book space at overseas shows and these are being picked up by competing countries. There is great concern about the inexplicable performance of the DIT which is jeopardising the export activities of SMEs across all industries.
  • Some of our companies are experiencing problems with their Banks on exports to Iran. The Government has asked our industry to build an export trade to Iran under the new political agreement. Lord Lamont has taken a Trade Delegation to establish trade links. However even if the companies get an export licence for a sale to an Iranian company there are doubts that the UK Banks will support the transfer of funds from Iran.
  • There is increasing concern about the possible impact of Brexit on manufacturing. Many companies have supply lines extending across Europe with ‘just in time’ systems for their production lines. Any interference by customs and/or tariffs in/out of Europe could cause serious problems and disruption of business.

I include some member comments on the problem of funding their businesses particularly for investment and growth. The big 4 Banks still have a negative attitude to lending to SMEs and the key points are very much as reported to the last meeting which were as follows:

  • Many SMEs are operating within their own cash flow or obtaining additional funds from shareholders, family and friends or re-mortgaging their homes etc
  • The alternative lending market is expanding
  • The British Business Bank (BBB) is helping the alternative lending market. A further development is the formation of URICA funded by the BBB and RSA insurance which helps SME cash flow by financing invoices and taking responsibility for chasing and collecting the debt.
  • There is still a problem of payments affecting SME cash flow. Large companies, who are reported to hold large cash piles, should be encouraged to pay their suppliers within 30 days or as quickly as possible. This will help the whole supply chain.

Kind Regards
Sir Ronald Halstead
EIA President