UK manufacturers need £650m in April to survive 2020 in wake of coronavirus crisis

08 April 2020

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UK manufacturers are facing a precarious future in the wake of the COVID-19 pandemic, according to insights from fintech business lender, MarketFinance. Over two thirds (68%) reported their order books have halved in the last 30 days. To compound matters, the majority (67%) have less than £50k cash – and without any support, will run out of money before the end of the month.

According to research by MarketFinance, almost half of manufacturers are seeking around a combined £643.5m in CBILS loan funding before end of April. Meanwhile, although two thirds have halved order expectations for 2020, 64% are optimistic that the business environment will normalise by the end of the year. MarketFinance's research is based on a survey (conducted by LM Research Consultancy, a Market Research Society-approved partner & ESOMAR corporate member) of 860 UK manufacturing businesses (who employ between 1 and 249 staff) in March 2020.

Loans
Over half (51%) of manufacturers are interested in accessing funding through the Coronavirus Business Interruption Loan Scheme (CBILS, which offers up to £5m, interest free for the first year, over 6 years) to shore up their business for the medium to long term. The majority (33%) of manufacturers are seeking an average loan of £62,500, equivalent to £417m for the sector (based on 20,000 manufacturing businesses in the UK according to Make UK's 'UK Manufacturing: The Facts 2019/20'). Just 4% were seeking a £10,000 loan; one in ten (11%) need £17,500; and a further 3% need £300,000. If they are unsuccessful in securing a business loan, most reported they would turn to invoice finance (finance on outstanding invoice payments owed to them). 

Cash flow
With March revenues halved and near term prospects looking uncertain, most manufacturers (64%) have revised down their order books for 2020 by 40-50%. They are seeking short term solutions to remedy finance concerns. They ranked a larger overdraft facility as first preference, before seeking a business credit card, and in third place, using invoice finance as a means to inject working capital into the business.
 
Anil Stocker, CEO at MarketFinance commented: “Manufacturers are in urgent need of support. All the industry indicators show orders are down and unlikely to recover much this year. They have been hit hard by the COVID-19 outbreak. A number of firms have had to shut their doors, and some that remain open are pivoting to make products that support the national effort to contain the spread of the virus. It’s imperative that we back these businesses.

Advice
Most (36%) manufacturers are turning to their accountants for advice on what to do next, before consulting their friends and family (19%). One in five (18%) are seeking advice from their bank manager. Business owners feel their accountants are the most accessible, given the remote working environment.    

Emma Loisel, founder & chair of Volcano Coffee Works commented: “We have a roastery in Brixton, London and our revenue dropped 91% in March. The lockdown has meant our hotel, cafes, restaurant and office customers are closed. We are pivoting to online sales, and sales have gone up seven-fold, but it’s nowhere near the revenue we need to sustain the business alone. We urgently need the CBILS funding at this challenging time, and give our wholesale customers time to start trading again. We’ve not needed a loan before, but hope that Lloyds Bank will look after us. We’ve been delighted with invoice finance from MarketFinance, which had helped us manage cash flow.”

Anil Stocker added: “Manufacturers turning to their accountants for support as their trusted advisors during this period of uncertainty. These accountants have the tools and know-how to support them in revising their cashflow forecasts, applying for loans and making contingency plans. It’s important for everyone – bank managers, accountants, financial advisors – to come together to support manufacturers. Business advisors will need to bring all their energy, skills and experience to save British manufacturers across the country.


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