With the latest set of monthly corporate insolvency data being published by the Insolvency Service – we can now finally analyse in full how the twelve months of 2023 impacted various industrial sectors in the UK in comparison to the previous four years.
You can read more about how the retail, construction, hospitality and education industries fared here.
This final part in the series focuses on the manufacturing industry which includes several important sub categories which we’ve broken down below.
Manufacturing insolvencies 2019 – 2023
| 2019 | 2020 | 2021 | 2022 | 2023 | Total | |
| Food & Beverages | 115 | 115 | 78 | 224 | 189 | 721 |
| Textiles & Clothing | 121 | 107 | 111 | 153 | 146 | 643 |
| Paper | 19 | 21 | 8 | 26 | 30 | 104 |
| Recorded Media | 123 | 80 | 75 | 145 | 150 | 573 |
| Metal including fabrication | 262 | 186 | 148 | 261 | 307 | 1,164 |
| Machinery | 62 | 56 | 34 | 76 | 74 | 302 |
| Furniture | 111 | 102 | 58 | 129 | 163 | 563 |
| Repair & installation | 133 | 97 | 196 | 186 | 190 | 802 |
| Total | 1,482 | 1,171 | 1,018 | 1,687 | 1,989 | 7,347 |
Figures from The Insolvency Service
The figures in all sub categories match the overall story for manufacturing insolvencies over the past four years.
There is a noticeable reduction in 2020 and 2021 due to a range of factors including financial support for businesses including bounce back loans and CBILS funding as well as legal restrictions on creditor actions such as statutory demands and winding up petitions.
Once these are lifted in 2022, then we can see big rises across nearly all categories and in overall numbers which grew by 65% in 2022 and 95% in 2023.
Individually, we can see that the number of metal manufacturers and fabricators has always been the most precarious with numbers only exceeding their pre-Covid equivalents last year.
Overall the manufacturing sector accounted for more than one in ten – 11% – of all corporate insolvencies in the UK in 2023. This made it the fourth highest sector behind retail, construction and hospitality, but ahead of real estate.
The majority of these insolvencies in the industry came from Greater London with 22% of all manufacturing business closures, 14% came from the North West and 12% from the broader South East area.
What challenges are manufacturers facing in 2024?
We look at the key issues facing UK manufacturers this year and why these challenges are so significant.
1. Economic Uncertainty and Rising Costs
- Global Volatility: The lingering effects of the pandemic, geopolitical tensions and high energy prices all create an overall climate of economic uncertainty. This makes forecasting and budgeting difficult for manufacturers.
- Inflation and Interest Rates: Inflation leads to increased costs for raw materials, energy, and labour. High interest rates continue to negatively impact business investment and expansion plans.
- Cost of Living Crisis: The UK’s ongoing collective cost of living crisis reduces consumer spending power, potentially affecting demand for manufactured goods which is particularly damaging if your clientele is more public facing.
2. Supply Chain Issues
- Continued Disruptions: While the worst of the pandemic-related disruptions may have subsided, supply chains remain vulnerable to shocks from global events such as the conflicts in Ukraine and Gaza, making them less predictable and more vulnerable for importers.
- Brexit-Related Complexities: Ongoing adjustments to post-Brexit trade with the EU continue to add costs and administrative burdens for manufacturers reliant on European components or markets.
- Reshoring Considerations: Manufacturers are continually weighing the benefits of reshoring (bringing production back to the UK) to increase supply chain resilience, but balance this challenge against potentially higher domestic costs.
3. Skills Shortages and Workforce Changes
- Ageing Workforce: An ageing workforce with specialised skills is retiring, leaving a gap that’s difficult to fill quickly, especially as immigration has been negatively impacted.
- Attracting New Talent: Manufacturing may suffer from an outdated image, making it less appealing to younger generations compared to other “trendier” sectors.
- Upskilling for Automation: The rise of automation and digitisation in manufacturing requires existing workers to be retrained or upskilled to remain competitive and new hires to be trained to a higher standard than previously required.
4. Technological Transformation
- Adoption and Investment: Implementing advanced new technologies like automation, artificial intelligence (AI), and data analytics can be expensive and goes in partnership with upskilling the workforce.
- Pace of Change: The rapid pace of technological innovation can put pressure on manufacturers to continually adapt. Do they jump on every single trend with the expense involved or risk missing a vital technological advance through lack of innovation or funding?
- Cybersecurity: Increased automation and connectivity expose manufacturers to greater cybersecurity threats, requiring robust defences which are expensive.
5. Sustainability and Net-Zero Commitments
- Regulatory Pressures: Government and industry targets for net-zero emissions will force manufacturers to adapt production processes and invest in sustainable practices which could involve significant disruption to certain manufacturing processes.
- Green Consumerism: Rising consumer demand for environmentally friendly products puts pressure on manufacturers to improve their environmental footprint and production processes.
- Balancing Costs: Transitioning to sustainable operations may involve significant costs, impacting profitability in the short to medium term.
Chris Horner, insolvency director with BusinessRescueExpert thinks that the trend of manufacturing insolvencies will continue to rise in 2024.
He said: “The surge in manufacturing insolvencies in 2023 reveals the immense strain businesses face due to shifting consumer behaviour, financial pressure and increasing global turmoil.
“High interest rates, declines in customer spending, increased recovery actions from creditors and HMRC and ongoing geopolitical instability mean that the landscape for manufacturers in 2024 will continue to be uneven.
“While inflation is forecast to come down and interest rates may be cut in the second half of the year, this doesn’t help manufacturers today.
“There are various strategies manufactures can pursue such as diversifying supply chains, focusing on upskilling and training and strategically focusing on digitalisation and innovation but each case and business is different and what may work for one could be irrelevant for another.
“The one thing they, and any company director or business owner can do, right now and regardless of their unique circumstances is to get some professional advice and help.
“They will be able to fully explore all the options available to them, while they have capacity to make changes that could take effect in the short and medium term.”
If you’re a manufacturer that’s worried about making it through the rest of the year then you should get in touch with us today.
Our advisors will be happy to work with you to better understand what issues you’re facing, what your goals are and how they can be achieved effectively and efficiently.