Welcome to BDO UK
United Kingdom
Industry Issues
Our specialist manufacturing team prides itself on pre-empting issues in the industry and offering tailored solutions to help move your business forward.
Accessing capital
Lean Manufacturing and working capital management
Service provision
Niche manufacturing
Maximising tax efficiencies
International
Low carbon industrial strategy
Accessing capital
The credit crisis has had both indirect and direct impacts on manufacturers. Initially it looked as though manufacturing would be spared the worst of the fallout from the turmoil in financial markets. However, in the past six months restrictions in the availability of credit and rises in the cost of borrowing, together with the sharp contraction in global demand, have hit the sector hard.
Previously secure debt facilities could now be seen by banks as “at risk”. In addition, many banks have started to revisit current arrangements to free up scarce capital to invest in companies with a better return or risk profile.
The most important factor is not to assume that your facilities are automatically secure and to develop a plan to consider your cash management and funding arrangements.
If you are considering raising new debt, refinancing your existing facilities, or are contemplating the need to restructure your banking arrangements, you will need to act now to get ahead of the pack because only the best prepared businesses will be successful. Banks will be much more selective about which opportunities they want to back and will quickly reject companies who have not comprehensively prepared and articulated their plans and headroom requirements.
Related links:
Six tips for accessing capital
Lean Manufacturing and working capital management
There is no doubt that the industry faces a testing time, but no matter the severity of the slow down, it’s the companies that focus on good house keeping, such as working capital management and the cost efficiencies of lean manufacturing, that are likely to emerge the strongest.
Many manufacturers have already had to go through one or more cost cutting programmes in recent years as they fought to remain competitive. However, our experience indicates that there remains significant potential for savings in most manufacturing companies.
Our highly experienced industry experienced consultants can align the issues of cost savings with lean manufacturing to arrive at solutions that maintain the integrity of the business.
In combination our working capital improvement and lean manufacturing specialists can make a major difference to the costs and working capital of a manufacturing business.
Related links:
Lean accounting report 2008
Navigating 2010 guide
Service provision
Many UK manufacturers now offer services on the back of production activities, blurring the lines between the traditionally distinct manufacturing and service sectors. This shows how manufacturers are using service offerings to increase revenue, offer greater value to customers and differentiate from competitors.
Manufacturers are broadening their range of service offerings in response to customer demand; including maintenance contracts, functionality upgrades and design services. However, many companies have not yet considered offering any services to customers and are currently missing out on these opportunities.
Related links:
Manufacturing advantage: changing the ground rules of global competition
Niche manufacturing
The definition of niche is no longer confined to ‘small’ or ‘unique’; niche manufacturing now includes a variety of activities incorporating the development of more sophisticated goods and technology, unique product design, flexible production and customisation.
To take the lead in niche markets, manufacturers should develop or reposition products and services in a way that adds value to a distinct customer base. Positioning a business in a key part of an important supply chain and offering just in time delivery from a location that is near the end manufacturer could be more important to bottom line success than traditionally thought.
Creating a niche position also means that UK manufacturers consider value to the customer in a different way, which benefits the lean manufacturing process.
Related links:
Manufacturing advantage: changing the ground rules of global competition
Maximising tax efficiencies
Manufacturers want to mitigate and manage tax liabilities, both in the UK and globally. Optimising the tax position through appropriate use of tax planning arrangements can make a big difference.
Many manufacturers spend significant effort introducing new products or new ideas and processes to production lines which will involve the building of prototypes, trial production runs etc. They often don’t realise that these activities could qualify for R&D tax relief in addition to the more obvious expenditure on new product development.
A recent survey indicated that 71% of manufacturers were not claiming this relief to the extent that they could. Successfully claiming this tax relief can give companies significant benefits in terms of tax saved, and in some cases cash repayments can be claimed.
Related links:
Tax services
Keep you up-to-date with tax
International
Since September 2008, manufacturing output across the world has fallen, as finance dried up and consumers reined in their spending. Continuing uncertainty has brought an additional level of complexity to the decisions UK manufacturers need to make about how to implement competitive strategies in the global market place.
At the same time as manufacturers experience fluctuations in exchange rates, input costs, commodity prices, freight, employment and other costs, they also need to asses longer term factors such as time to market, protecting IP and the quality and reliability of local suppliers.
Successful manufacturers continue to review location and sourcing decisions so they can make critical changes to their supply chains. When we emerge from recession – which we will – these companies will be in a strong position to profit from the upturn.
Competition from emerging economies remains strong. Countries such as India and China are not only developing low cost models but also moving up the value chain as they develop innovative, higher quality products. There is an upside to this challenge as manufacturers from these countries seek to establish their own overseas operations.
Related links:
Unlocking China
Low carbon industrial strategy
Our political leaders have been making the right noises about the transition to a ‘low-carbon economy’ for a while now. This is a major business opportunity from which UK industry is well placed to profit, and policymakers will need to ensure that the right conditions are in place for it to flourish. Unfortunately, fine words have yet to be matched by a clear agenda or substantive policies.
However, there are signs that a more proactive policy could finally be emerging. Most obviously, government has committed to developing a ‘low-carbon industrial strategy’ in 2009. The fact that some of the financial support for the automotive industry is being made conditional on investment in green technologies could also be interpreted as evidence that a shift in policy is underway.
At the beginning of March, government unveiled its ‘vision’ for a low-carbon industry strategy. Again, it was a case of words rather than actions, but the change in language and emphasis was significant. Government’s role was no longer being cast as that of a relatively passive bystander tweaking high-level incentives, such as carbon pricing, to encourage growth in this area. Instead, there were commitments to ‘a new industrial activism for a new green industrial revolution’ and ‘making the UK the best place in the world to locate and grow a low-carbon business’.
Clear leadership from government will be decisive. Many countries around the world have equally ambitious plans to develop low-carbon economies and are beginning to devote considerable resources to back up their plans. A wide range of factors within the influence of policymakers, such as taxation, skills and infrastructure, will determine whether the UK is seen as an attractive place to develop the industries of the future. The government is right to look beyond the recession at the opportunities for growth when the recovery comes, and the hard work starts now.