During Covid-19, the industrial sector faced barriers to success due to numerous lockdown restrictions and supply chain disruptions globally. While we are moving towards the end of the pandemic, the manufacturing sector continues to face significant issues, from new laws and regulations to supply chain disruptions and significant skills shortages.
We have partnered with Wakefield Manufacturing Forum, an expert organisation dedicated to raising awareness of UK manufacturers’ problems, to reveal the top challenges manufacturers will likely face over throughout 2023.
From supply chain diligence, a focus on social value and higher material and transport costs, here are the top threats to manufacturing businesses in 2023:
1. Changes to public procurement
The Public Procurement Bill, which is still in discussions within parliament, sets new rules on how public companies can sign government contracts. In essence, the change in legislation should make it easier for businesses to access high-value contracts.
There are concerns over annual performance monitoring, as contracts valued over £2 million will be subject to annual reviews, where the findings can be published to the public. This will open public contracts up to public scrutiny without needing a Freedom of Information request, which could be damaging to small and medium manufacturing businesses.
2. Materials shortages
Sourcing and purchasing materials to fulfil customer orders and keep up with demand will be one of the most significant challenges facing manufacturers. According to a recent survey, 56% of UK manufacturers see supply chain disruptions as one of the most significant risks they will face to staying ahead of the competition.
This will challenge manufacturers because there will be competition for materials, possibly driving prices further. Firms must look for alternative suppliers, such as second-hand machinery auctions or job lot sales, to fill stock more quickly.
3. Global focus on supply chain due diligence
As discussed, supply chain issues are expected to remain, and due diligence is also a big focus in overseas business dealings. In particular, all businesses in the EU are expected to take responsibility for respecting the environment and employee rights under the umbrella term ESG (Environmental, Social and Governance).
This will impact UK manufacturers’ relationships overseas, as any country with supply chain due diligence Acts will be expected to take more care when choosing suppliers, consumers and investors.
4. Building Safety Act reforms
The Building Safety Act, first introduced in April 2022, sets out new laws for constructing buildings going forward, including safety regulations for industrial infrastructure such as factory buildings.
Amongst the new legislations, between April and October 2023, all higher-risk buildings must be registered with the Building Safety Regulator. In October 2023, new safety management requirements will pressure businesses to take more liability for potential safety risks.
While only a limited number of regulations were enforced last year, 2023 will see all of the regulations made into law, placing extra pressure on manufacturers to ensure they stay current on all the new regulations.
5. Increased transport costs
Access to transported raw goods and business assets, such as machinery, is an essential cost to manufacturers. However, the high post-pandemic prices are expected to continue in 2023, placing additional pressure on profit margins.
Inflation and higher fuel prices are just some of the reasons behind increased transportation and freight costs, meaning that manufacturers will have to fork out more to keep gaining access to raw materials to meet client demands. Higher transport costs for finished goods will also drive up the overall cost of production, although the end user may subsidise this.
6. Scrutiny of suppliers by Government guidance
There is a growing emphasis and scrutiny on manufacturing firms and the construction sector, which will continue to challenge business owners in 2023. Suppliers of all goods must comply with a wide range of legal, environmental and safety practices, which can be especially challenging for new businesses.
There are a growing number of legislations that suppliers have to comply with, including UK GDPR, Health and Safety at Work etc. Act 1974, Environment Act 2021 and Equality Act 2010.
7. Increasing awareness of social value
On top of government pressures to meet various legislations, there will also be an expectation for manufacturers to prove their social value, which essentially measures the positive impact that businesses create for the economy and broader society.
Social value is a notoriously difficult metric to measure. Increasing awareness of the concept will force firms to spend more time, money and resources using frameworks like TOMs (Themes, Outcomes and Measures) to report on and justify their positive impact on their community.
8. Lack of investment opportunities
In 2022, 15% of total business investment was made by UK manufacturers; however, this is expected to drop in 2023, reflected in the fact that 43% of manufacturers themselves report that Britain has become less attractive to overseas investors.
Investment opportunities are one of the most critical factors behind business development for firms, so a drop in investment interest would create a challenge for business owners who will need to seek out new ways to secure funds.
9. Inflation and pressure on margins
With a recession predicted, manufacturers will feel the squeeze from inflation, higher material costs, pressure on margins and potentially lower profits.
Coupled with higher material, labour, energy and transport costs, manufacturing companies may need help to stay afloat in 2023. Finding smart ways to dispose of unwanted industrial assets, such as stripping for parts or selling second-hand on an auction platform, can recoup some funds and ensure you have a steady cash flow to replace old or broken machinery.
10. Labour shortage
The manufacturing sector has a significant skills shortage, which is expected to continue in 2023. Experts suggest that highly-skilled workers are now an ageing population, with many aged 55 and over choosing to stop working during the pandemic due to safety concerns.
The inability to fill positions quickly will hamper productivity for manufacturing firms while also compounding some of the existing issues, such as lower profit margins due to inflation, as firms will have a smaller capacity to take on new contracts.
Tim Mee, Chairman at Wakefield Manufacturing Forum, comments, “Wakefield has a rich heritage and contains many world-beating companies in the manufacturing sector, and we’re always looking to raise the profile of manufacturers across the region. We’re excited about our new partnership with BPI, who are experts in their field and have great experience supporting Manufacturers.
“We are optimistic about the future of local companies having the voice that they need to continue to thrive and attract new talent. We hold our monthly manufacturer events on the third Thursday of the month, and it would be great to welcome any local companies who would like to join us.”
Our Operations Director at BPI, Henry Spencer discusses the importance of smart asset management and how this can support Wakefield’s manufacturing industry resilience: “Manufacturers are facing escalating challenges in today’s economic landscape, however, with the smallest changes and forward-planning, they can improve business resilience.
“By monitoring machinery, equipment, and fleet health, manufacturing businesses can turn such commercial assets into cash-flow lifelines. Swift, strategic-driven decisions enable timely asset disposal and renewal, reducing maintenance costs and downtime. Smart asset management builds resilience against supply chain disruptions and soaring expenses, aligning with social values and boosting sustainability, appealing to both consumers and investors.”
At BPI, we have over 50 years of experience in asset disposal and understand the challenges businesses face when it comes to disposing of their commercial assets. We have a team of industrial asset disposal experts assisting businesses by developing bespoke solutions to increase cash flow and remove unwanted assets.
To find out the potential value of your assets, get in touch with our team today.
