Unlocking growth, where small UK Manufacturers can find the support to scale

Written by Katherine Campbell – Sales Director. 

When you hear the phrase 'UK manufacturing', most people think about the likes of Rolls-Royce, BAE Systems, or Jaguar Land Rover.

However, according to manufacturing industry group Make UK, the vast majority – around 99 per cent of the UK's 250,000 active manufacturing firms – are small or medium-sized businesses... 

Almost two-thirds of these SMEs, it says, are aiming to grow into large businesses over the next decade. And if this were achieved, it could add £83 billion in value to the manufacturing sector and help lift the UK from its current position as the world's 12th largest manufacturing economy to the seventh. 

“Small and medium sized businesses already play a significant part in contributing to growth but, with the right support, they could do even more," says CEO Stephen Phipson. 

While small manufacturers face challenges in terms of skills, labour, and exports, by far their biggest hurdle when it comes to scaling up is a lack of finance during the make-or-break period of seed funding and early growth investment.

The government is keen to help – and there are a number of sources of funding available aimed specifically at small manufacturing businesses. 

"We are taking R&D investment to record levels and matching our words with action by empowering researchers and businesses to solve real-world problems, grow emerging new industries, and create high-quality jobs," promised science and technology secretary Peter Kyle following last year's autumn budget.

The Department for Business and Trade-owned British Business Bank, for example, provides finance and investment to SMEs through start-up loans and government-backed guarantees aimed at reducing the risk for finance providers and making them more willing to lend. 

It also offers business guidance to help smaller businesses understand their finance options and be better prepared to access the right funding to achieve their goals.
The High Value Manufacturing Catapult (HVMC), meanwhile, supports innovation in manufacturing. It's aimed at helping small manufacturers connect with the right partners in industry, government and academia, access new markets, cut production costs, energy use and waste, optimise production and supply chain, and upskill workers.

It was given further support in the government's Industrial Strategy.

"The High Value Manufacturing Catapult has a proven track record of turning policy into progress, investing more than £1 billion in a nationwide network of research and development facilities," said CEO Katherine Bennett. 

"We now have the opportunity to go further and faster, scaling our impact in the regions in which we operate and deepening our commitment to driving national economic growth."

According to Made UK, fewer than a third of small UK manufacturers are aware of Horizon Europe, the €95 billion EU programme for research and innovation – but it can be a big source of funding for the right firms.

It's aimed at projects involving ground-breaking research or new technologies that create growth in sectors like advanced manufacturing, materials, biotechnology, information and communication technology, nanotechnology and space, or that deal with challenges like climate change, food security, or healthcare for an ageing population.

There's also specific help for life sciences manufacturers, thanks to the Life Sciences Innovative Manufacturing Fund (LSIMF). This kicked off last autumn with £70 million in grants, and a long-term commitment of up to £520 million to secure major life sciences manufacturing investments across the UK.

And the Made Smarter scheme is aimed at helping businesses adopt digital technology.

More, though, could be done for smaller British manufacturers, says Make UK. The government, it says, should consider creating an Estonia-style British business 'Bürokratt' software tool to pool data collected by HMRC and ONS, which could be used to help micro-target support to identified companies. 

It should also introduce a super-growth allowance of 150 per cent capital allowance and establish an enhanced Growth Enterprise Scheme (GEIS) to boost SME scale-up efforts.

And, says Make UK's Phipson, "To boost SME exports, government should introduce an Export Development Scheme to improve access to trade finance and expand export finance services to incorporate additional risk management support."

Other top barriers to growth, according to the Make UK report, include difficulties in adopting automation and lack of access to skilled labour –, particularly skilled engineers and those employees with developed leadership skills. 

More than four in ten manufacturing SMEs want information or advice on adopting digital technologies and automation, while 43 per cent want better support for apprenticeships to train the next generation of engineers and technicians. 

Says Andrew Everett, CEO of engineering industry group ERA Foundation, "Support for skills development, capital expenditure, finance for growth, exports and operational costs are critical for our high-tech manufacturing sector to deliver the economic benefit that we know they can."

Ready to scale your manufacturing business?

At Howden, we understand the unique challenges small manufacturers face, from funding gaps to risk management. Our specialist team is here to support your growth journey with tailored insurance solutions and expert advice.

Secure a no-obligation meeting with our manufacturing team today – book your meeting here.