- New research from Three Business shows small and medium enterprise leaders (SMEs) across the manufacturing sector are expecting on average 14% revenue growth in 2024
- Collectively, they’re planning to invest £26 billion in growth during 2024, a 5% increase compared with 2022, as over seven in ten (72%) manufacturing SME leaders say they plan to ramp up investment next year
- Over three in five (63%) of sector SME leaders say their business is more resilient now than before the pandemic, while over four in five (82%) feel optimistic about 2024, compared to 70% of SME leaders surveyed across the country
- Commenting on the findings, business mogul and mentor, Sara Davies, says: “The UK’s SMEs are vital contributors to the economy, and I’m genuinely excited looking ahead to next year knowing there is so much appetite for growth and investment.”
UK Small and Medium Enterprises (SMEs) in the manufacturing sector are looking forward to a promising 2024, as they expect to hit an average of 14% year-on-year revenue growth, bringing overall manufacturing SME turnover to £233.6 billion.
New research outlined in the Ambition Index from Three Business – the B2B arm of the mobile network Three – has revealed SMEs in the manufacturing sector feel a renewed sense of optimism and ambition, following the tough post-pandemic years.
Contrary to the International Monetary Fund’s (IMF) gloomy outlook, that Britain’s economy will be the slowest growing among G7 nations next year, manufacturing sector SMEs are collectively planning to invest £26 billion in growth in 2024, a 5% increase compared with 2022.
Seven in ten (72%) SME leaders surveyed in the sector are planning to invest more in the next 12 months than in the last year. The top areas of investment include staff training and development (32%), improving facilities and tools (30%), supply chain capacity (28%), and marketing (28%).
Weathering the storm and showing resilience
Having navigated a tough few years, over three in five (63%) of manufacturing SME leaders surveyed believe their business is now more resilient than before the pandemic. Over three quarters (77%) feel more confident in their business having survived the fallout from the pandemic and the ongoing cost of living crisis, and 78% say their business is resilient.
This positive attitude continues into 2024, with eight in ten (82%) saying they feel optimistic for the year ahead, significantly higher than the national average of 70%, and three in five (60%) saying the outlook for next year is better than they expected at the beginning of 2023.
SME leaders in manufacturing have also shown agility in times of crisis, with eight in ten (87%) saying they introduced changes to their business in response to the pandemic, and 83% saying they had to adapt to survive – much higher than the national average of 73%.
Over two thirds (68%) have also come out of the pandemic and subsequent economic uncertainty feeling more capable of dealing with the pressures of running a small business.
Challenging times remain
While the future is looking brighter than it did last year, there remain a number of challenges for businesses of all sizes, which are often felt more acutely by SMEs.
Almost two thirds (63%) of SME leaders in the manufacturing sector say the challenges they face as a small business are different to those faced by medium or large businesses, and 73% say the uncertain environment has intensified the risks and pressures of running a small business. These leaders are particularly worried about high interest rates (33%), the impact of the rising cost-of-living on their business (32%), and on their customers (25%), as well as rises in business rates (27%).
Looking ahead to the Autumn Statement, the optimism about their own business prospects does not extend to the broader political environment, with just 27% saying they are optimistic ahead of the Autumn Statement, 22% are apprehensive, and 28% say they are pessimistic.
Of the issues the Chancellor is expected to address, SME leaders in the manufacturing sector most want to see an increase in the threshold for Small Business Rate Relief (52%), increase in the R&D tax relief (37%), measures to support the labour market, for example, childcare support and pension changes (28%), as well as an increase in the SME credit rate, and clarity on government policy (both 23%).
Mike Tomlinson, Managing Director at Three Business commented: “Small and medium businesses are the lifeblood of the UK economy. It’s great to see the strong sense of optimism and learned resilience that’s coming through among all SME leaders, in particular in the manufacturing sector. These leaders have shown that they have risk-proofed their businesses and are now ready to invest in their future, grow and take on the challenges of the next 12 months. At Three Business, we work in partnership with SMEs in all sectors and regions to make sure connectivity is an enabler for growth.”
Insiya Jafferjee and Amir Afshar, Founders of bio-tech company Shellworks in North London, say: “The last four years have been a rollercoaster. Like most businesses we have been impacted by the pandemic and wider economic disruption. But we have managed to come out the other side, grown our team and even secured contracts with some of the leading brands in our category. We have recently moved into a new office in North London that will allow us to expand our workshop and lab, and we are hopeful we can make big strides in the year ahead and help more businesses transition to a waste-free future.”
Commenting on why she’s supporting the Ambition Index, business mogul, investor, mentor and TV star, Sara Davies says: “The last few years have presented numerous, often unforeseen challenges, but I work with some amazing businesses and leaders and have been so impressed by their resilience and how they have adapted. The UK’s SMEs are vital contributors to the economy and to their communities, and I’m genuinely excited looking ahead to next year knowing there is so much appetite for growth and investment, as The Ambition Index shows.”
The UK picture for SMEs
Across the board, UK SMEs are looking forward to an average of 15% year-on-year revenue growth, bringing overall SME turnover from £2tn in 2023 to £2.3tn next year[1]. They are collectively planning to invest £252 billion in growth in 2024, a 27% increase compared with 2022. This means that UK SMEs are planning to invest a sum that is approximately equal to the value of the economy of Finland during 2024.
Investment in recruitment is on the agenda of business leaders across all sectors, with almost a quarter (24%) saying they are planning to make it a priority. This would make for an estimated collective spend of £20.4bn, equivalent to an extra 630,000 jobs paying the UK average annual salary of £32,000 per year[2].
Other areas of investment focus for SMEs in 2024 include:
- Marketing, with a collective estimated planned spend of £35.1bn
- Staff training and development - £27.2bn
- Customer service - £24.7bn
- Improving facilities or tools - £22.3bn
- Digital technologies, including AI - £19.7bn
[1] Calculated using baseline 2023 revenues from ONS data, October 2023