As recession starts to hit South West manufacturers, Chloe Rigby takes the temperature of the sector and hears how some long-established companies have faced both this and previous challenges.
The mood is changing in the South West’s manufacturing sector as recession bites.
Pre-Christmas optimism is giving way to caution and companies are starting to report shortening order books, according to Arthur Richardson, chief executive of the South West Manufacturing Advisory Service. “There seems to be a timelag here compared with when things reach the South East and Midlands,” he says.
Worst hit are suppliers to the construction industry and companies that depend on big-ticket consumer spending, from DIY and textiles to white and brown goods. Swindon’s Honda car plant stopped production for four months from February to the end of May, and companies in the automotive supply chain are feeling the knock-on effects from the industry-wide slowdown.
Among them are companies like Wotton-under-Edge’s precision engineering company Renishaw, which cited an “unprecedented slowdown” in demand for its measuring equipment from customers including car makers in a March trading statement. It warned then of operating losses and announced wage reductions and 500 job cuts.
Widely felt concerns include increased competition on price, pressure on suppliers to reduce costs, delayed orders, payment and bad debts from customers, as well as difficulty raising bank finance.
There are still bright spots, however. “Aerospace doesn’t seem to be much affected,” says Richardson. “Maybe they will ride through it because buying aeroplanes is a long-term investment decision.” Car production is expected to start to picking up now that many firms have run down stocks, with Honda due to have begun production again by the time you read this.
And the weakness of the pound is also making it more economical to buy components here. Some companies that have outsourced offshore are looking to bring production back to the UK, believes Roger Hunter, business support product manager at the South West RDA. He says: “Those businesses we are in contact with are looking up and down their own supply chain and seeing where they can reduce cost.
”Many small companies, he adds, are considering methods of reducing their staff costs without laying people off, from pay freezes to four-day weeks.
But the upturn will come, and, says Richardson, most manufacturers remain confident they will survive.
Hunter adds: “The companies that are going to do well and get back on their feet the quickest are the ones that are looking right now at the way they do things and not just at the cash. They are looking to innovate – growing skills and investing in equipment.
To read the survival stories of St Austell Brewery, Severn Glocon, Beards of Cheltenham, Axminster Carpets and the Dorset Village Bakery purchase a copy of the June 2009 edition of South West Business Insider in our online Shop.
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