Manufacturers facing post-Covid cash, credit and costs crunch, say experts

Manufacturers are facing an “unprecedented combination” of a post-Covid credit, cash and costs crunch, new research suggests.

Firms are facing demands of an economic recovery hampered by disrupted supply chains and mounting skills shortages, said Make UK and tax consultants RSM.

They said their survey of more than 200 company finance directors indicated manufacturing was facing a “sharp inflationary spiral” which threatens to reach a level that would provide a tipping point for the business model of many.

Almost half of respondents said their cash position was worse than at any point since the pandemic began.

Make UK urged the Government to consider payment holidays for loans that companies took out as a precautionary measure.

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 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.”

Two thirds of companies surveyed said a lack of cash has hampered their growth plans, while almost half had trouble fulfilling orders.”