The latest research from Bibby Financial Services (BFS) reveals that small and medium sized (SME) manufacturing businesses across the globe are being significantly impacted by current economic conditions.
Indeed, four in ten (40%) manufacturers surveyed across nine key international markets agree that global business conditions are worse now than during the pandemic, and over a quarter (27%) also report that the situation now is worse than it was following the global financial crisis.
As global manufacturing activity has weakened, so has the outlook of the sector’s SMEs towards the wider economy. Only 16% of businesses surveyed think the global economy will strengthen in the coming months, and more than one in ten (13%) still believe that recession is a possibility.
Jonathan Andrew (pictured), Global CEO of Bibby Financial Services, said: “A combination of factors such as rampant inflation and rising material costs are creating a suboptimal trading environment for manufacturers across the globe. Nuances across markets also mean that the situation is undeniably tougher in some locations more than others - such as in the Eurozone, which is suffering from particularly persistent inflation.”
The data reveals the top three issues keeping manufacturing business owners awake at night, with inflation (56%), energy costs (55%) and the uncertain economic environment (29%) continuing to hamper the sector’s growth around the world.
Cashflow concerns
Small manufacturers are also concerned about cashflow. Only half (55%) say they have stable cashflow that meets their needs. In addition, as many as one in three (33%) have suffered a bad debt in the last 3 months, and half (52%) state it is taking longer for customers to pay, compared with 2022.
As a result, an increasing number of manufacturing SMEs are tapping into external financing support. BFS’s research shows that 47% of respondents are more likely to use external finance now than before the pandemic.
The manufacturing sector remains optimistic despite challenges
Despite cashflow concerns, manufacturing SMEs remain optimistic, with 86% reporting that they are confident about their business prospects for the remainder of the year. This confidence translates into a positive outlook towards sales expectations, with 72% expecting their sales to increase in the next six months.
Jonathan Andrew added: “Manufacturers across the globe have shown remarkable resilience amidst the turbulence of the last few years. However as inflation and the cost of doing business remains sky-high it is clear that manufacturing SMEs across all markets require continued support from both the public and private sector.
“It’s important that SME owners are able to access the finance they need to support their business operations. Exploring a range of financing options to determine which best suits their needs is one way in which small businesses can successfully translate optimism into growth.”
The full Global Business Monitor report is available to read online here.
