Transport costs fuelling problems for ambitious Scots manufacturers

By SCOTT REID
Published on 17/07/2012 00:00

Scotland’s small manufacturers have “ambitious growth plans” but are being held back by rising fuel and transport costs as well as late-paying customers, research suggests.

Supply chain problems are also constraining firms from expanding, according to a study by the Federation of Small Businesses (FSB) in Scotland.

The organisation, which quizzed almost 100 companies across a diverse range of sectors, said more attention should be paid to businesses that account for almost 90 per cent of the country’s manufacturing sector.

The findings indicate that, while about two-fifths of small manufacturers plan to develop products, 23 per cent want to expand into other sectors and more than a fifth – or 22 per cent – are looking to tap into further territories, many of them are being held back by the economic climate.

The cost of fuel was cited by 95 per cent of respondents as a reason for the lack of growth, while 88 per cent said transport was a key barrier to expansion.

Half of those surveyed noted that supply-chain challenges, including reduced demand and pressure from larger companies to cut prices, were a problem. The report found that the majority of smaller businesses have a turnover of below £500,000 a year and employ fewer that ten people, yet they make up almost nine out of ten manufacturers north of the Border.

Andy Willox, Scottish policy convenor for the FSB, said: “When we talk about manufacturing in Scotland, we often only think of our huge household names or multi-nationals with a Scottish presence. But, in reality, nearly 90 per cent of those in the sector are small businesses.

“If Scotland has ambitions to grow its manufacturing base, we really need to understand the profile of those small manufacturers. Our research shows a diverse mix of businesses, operating across the length of the country.”

He added: “The rising cost of transport and fuel is squeezing many in business and manufacturers are no exception. However, they also face additional pressures piled on by supply chain problems and late-paying customers.

“Only half of our small manufacturers export. Those who don’t point to a perceived lack of international demand or simply don’t think it is right for their businesses. Those that do, point out that currency fluctuations and long payment periods can make life difficult.”

Willox said small manufacturers had to be listened to if Scotland wanted to “broaden and strengthen” its economic base.

Among the case studies cited by the FSB was a textiles firm employing fewer than four staff that said it will have to rely more heavily on direct selling after seeing its margins squeezed.

Another business – a Highlands boat specialist – has diversified in order to retain skills amid a slowdown in demand for pleasure craft.

The regular Cips purchasing managers’ index revealed Britain’s manufacturing sector had contracted for the second straight month in June despite solid export trade with many developing nations.