Dubbing manufacturers “zombies” impacts their ability to access finance

Manufacturing is an enduring British success story. The sector is important to the UK economy both in terms of its contribution to GDP and the number of people it employs. But a more long-term view must be taken by policy makers, financiers and businesses to ensure manufacturers are able to secure appropriate finance, according to the ‘Audit Insights: Manufacturing report.

At the report launch in Sheffield, Bob Neate, partner at Mazars, said: ?While data shows the outlook for the sector is becoming more positive, there is still a lot of catching up to do due to the under-investment that has persisted for some time.?

Manufacturing differs from other sectors as it requires a significant amount of money to keep up with changes in technology, demand, the need to constantly innovate, management of complex supply chains and difficulty in costing products and contracts.?

Neate suggests that ?the government needs to become much better at sharing information on available capital grants and schemes, while the manufacturers have to improve their communication with all finance providers. If people don’t understand the cyclical nature of the sector and its requirement for investment before the returns are realised, the sector’s growth potential is at serious risk and the rebalancing ofthe UK economy towards manufacturing would become impossible.?

The report, based on the input of auditors from ten large and medium-sized audit firms, highlights four red flags.

  • The roller-coaster nature of the sector;
  • Funding;
  • Skills; and
  • IT/data management systems.

In particular, the report raises a growing concern about challenges linked to the costing of fixed-price contracts, where having appropriate data/IT systems are a critical prerequisite, and thegrowing trend to issue longer-term product warranties, as it isdifficult to anticipate the financial impact of such warranties andthe risk they represent to the business, particularly where there isno track record.

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