If you are considering buying a manufacturing business, you couldn’t pick a stronger industry to invest in. Transworld Business Advisors has the low down on the current state of manufacturing in the UK.
When it comes to running a business within the manufacturing sector, there are a variety of options to choose from: automotive, construction, pharmaceuticals, food and drink, electronics, to name but a few. As an overall industry, manufacturing accounts for around 20% of the UK economy, and contributes around £6.7 trillion to the global economy, according to the Hennik Annual Manufacturing Report.
Key findings from February’s report, indicated a strong industry at the beginning of 2019. However, subsequent chaos around a no-deal Brexit is – unsurprisingly – negatively impacting the industry. During quarter two, manufacturing’s economic output contracted by 0.2%. Rob Dobson, Director of IHS Markit (the UK’s purchasing managers index) says, “High levels of economic and political uncertainty, alongside ongoing global trade tensions, stifled the performance of UK manufacturers in August.”
However, in spite of the Brexit challenge, manufacturing continues to employ 2.7 million people, is responsible for 44% total UK exports, and contributes 70% to business research and development.
According to Mark Hughes, regional vice president of Epicor Software, UK and Ireland, part-sponsor of the report, “The ongoing digitisation of the sector played a key role in the growth [we had seen at the beginning of the year] as manufacturers realise its potential. Brexit actually has the potential to bring significant opportunities to British manufacturing. Current and future technological advances means now, more than ever before… ‘Made in Britain’ will be key to helping Britain stay on top.”
So, what should you look for in a healthy manufacturing business?
Here are three important reflections, to help you understand the health of your prospective new venture:
1. The overall financial picture.
When you are about to buy a new business, in any industry, you want to understand the books, first and foremost. The health of the business should be clearly marked by its financial state. Watch for consistencies, as well as growth. Some sectors are more productive during certain months, dependant on consumer demand, whilst others may close over the summer, for example, having an impact on the figures for the month.
2. Staff moral
A healthy manufacturing business is most keenly identified through its workforce. A demoralised team will be less productive, and more likely to feel anxious about a change in management. A healthy team are happy in their work, will collectively cope with the change, and maintain productivity of your product.
3. A strong customer base
A healthy manufacturer has a strong client list, which stems from the solid reputation it has established. People understand the product, they appreciate the value of it, and have come to trust the company to supply them with the quality they need. When you take over the business, you should expect to build your own relationships with your key customers, rather than leaving them to the past relationship.
Transworld Business Advisors is a global network of business brokers. Call us today to find out how we can help you find the right manufacturing business to suit you.