When times are tough, we often see firms retreat. It’s a natural reflex when faced with difficulty, but it can also impede long-term growth.
In the manufacturing sector in particular, we’re seeing a period of turbulence. The latest IHS Markit PMI data for the sector shows it has experienced a 34-month low in activity, with new orders falling at the highest rate in almost three years. This follows a more buoyant period, largely down to the pre-Brexit stockpiling flurry in the first quarter of the year.
It’s now clear that challenges are firmly taking hold. The uncertainty around the UK’s future trading relationship with the European Union, coupled with the impending skills shortage and rising wage costs, means firms are taking a more cautious approach to how they operate.
During times like this it’s important for the management team to ensure they explore all options and seek out specialist advice to help navigate periods of change to help their business weather the storm.
Approaching banks or investors can be a common route when undergoing periods of financial and operational transition but putting an interim manager in place can also be highly beneficial. We have seen an uplift in specialist interims being placed in manufacturing firms.
With 15 per cent of all interims placed into roles by FRP over the last twelve months operating within the industry – an uplift of 12 per cent on the previous year, this increase is more than any other sector.
There is still a common misconception that interims are symptomatic of a business being in distress. Yet increasingly often the requirement of an interim is simply to help navigate challenging times – whether that’s helping to put an expansion plan into motion, advising on restructuring or supply chain management. Having that extra experience at the boardroom table can be invaluable.
At FRP, we recently worked with a marque which specialises in high end sportscar production and racing to deploy a specialist manufacturing interim CEO. The business had experienced a period of fast-growth in its early stages, however it hit a more turbulent patch and started to veer into loss-making territory.
At this point, we worked with the business to bring on board the support of an experienced interim with expertise in the manufacturing sector. Over an 18-month period of working with the business, the business became stable and returned into the black, reviving its orderbook to span across five continents and a swing of £1.2 million EBITDA and a secure future.
It’s transformations like this that show the added value an interim can bring – not always at the point of distress but as a tool to help reinvigorate a business. And as manufacturing firms are faced with increasingly complex cross-border supply chains, fluctuating input costs and a question mark over access to skilled labour moving forward. The added layer of support that an external adviser can offer can be a gamechanger.