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Supply chain warning issued for hard service sector

18 May 2017

Results within the second YouGov Supply Chain Funding Index survey show both optimism and concern over the future for the engineering sector, many of which are suppliers of hard services.

While the result that 74% of respondents believe their turnover will grow over the next 12 months, 42% state that they perceive supply chains to already be at breaking point.

If the supply chain has reached, or is about to get to this stage, the survey raises the question of how engineering companies will be able to achieve their growth expectations.

Results from the first supply chain survey conducted six months ago were translated to show a value of between 0 and 10, achieving a figure of 6.5% that was described as "weak".

The latest survey, the results of which were released earlier this week, show the figure to have dropped to 6%.

Commenting on the result, economist Dr John Ashcroft said: "A further slump towards 5.5 would threaten the capacity of the engineering industry to capitalise on future export opportunities."

It was further explained that 12% of engineering turnover is currently accounted for by exports.

A further result showed that 40% of engineering businesses had experienced a break in their supply chain over the last year of trading.

Approximately 50% of these had "experienced disruption" caused by the break, said the report.

The YouGov study also raised concern over pressure on cash flow within the engineering sector, with working capital requirements rising from 35 to 49 days in the last six months.

Engineering Industries Association president Sir Ronald Halstead attributed this to Brexit, with the fall in sterling raising raw material costs that has resulted in more companies retaining cash to investigate "alternative solutions".

Spending on imports has increased from 13% to 20% of turnover in the last six months for the engineering sector, the survey revealed.

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