Growth outlook in manufacturing declines significantly despite positive Q1 figures

Monday 22nd May 2023

Growth projections in the manufacturing sector have fallen this quarter, with the percentage of small businesses in this sector predicting growth in the next three months at 34% (vs 44% Q1’23), according to new findings from Novuna Business Finance’s Business Barometer. Meanwhile, the proportion of businesses in the sector anticipating a period of contraction has increased from 16% to 20% over the same period.

This comes at a time when further interest rate increases from the Bank of England could dampen the recovery of small businesses, while firms are also under pressure from high costs of energy, raw materials and rising staff wage bills.

Nationally, the percentage of small businesses predicting growth remained consistent on last quarter at 32% - placing manufacturing above the national average, but still below last quarters projections.

Growth outlook among small businesses in manufacturing

The Novuna Business Finance study has been tracking small business growth predictions against prevailing market conditions every quarter since 2015. At the start of each quarter Novuna asks a representative sample of 1,200 small business owners about their growth predictions for the next three months. At a time of unprecedented economic strain and market uncertainty, the dramatic fall in growth projections reflect the strain felt by businesses in the sector, with the pronounced dip in those businesses contracting only adding to this shaky outlook.

Across the country, the picture by sector told a varied story. After a difficult few years, there was signs of much-needed recovery for small businesses in Hospitality, Agriculture and Retail – three sectors hit especially hard during the Covid era. In the Agricultural sector, the percentage of small business owners predicting growth has risen from 22% to 30% over the last 12 months, with positive growth forecasts in retail up from 25% to 31% and Hospitality 24% to 38%.

Growth forecasts have fallen sharply in the Media sector (from 49% to 38%) and also in Transport and Distribution (35% to 25%). Further, with uncertainty over UK property prices, growth forecasts in the Real Estate and Property sector have fallen from 21% to 15% over the last 12-months.

A combination of high energy costs, an uncertain economic outlook and low consumer confidence is hampering the outlook for many in the manufacturing sector. Nationally, the percentage of small business predicting growth has been remarkably steady at between 27%-30% for the last four quarters. Whilst this suggests resilience, the picture does vary considerably by industry sector - with our latest data also revealing that those small businesses who arguably had the hardest time over the past few years were also those more likely to be predicting growth as we move towards summer.

In the current economic climate, many enterprises are focusing on financial strength as the platform from which to plan business growth. For many, this involves managing late payment and protecting cash flow and many enterprises also see 2023 as a time to invest – in new equipment and capabilities. For established businesses looking to drive growth in 2023, Novuna Business Finance is committed to helping them fulfil their true potential. We understand the growth cycles that small businesses go through and we have both the products and toolkits to support their growth ambitions.

Jo Morris

Head of Insight

Novuna Business Finance

Note to editors

The research was conducted by YouGov among a representative sample of 1,088 small business decision makers between 27 March and 10 April 2023, spanning all key industry sectors.