Shaw & Co, the specialist corporate finance advisory firm, has launched the second of its annual in-depth reports into the Manufacturing & Engineering (M&E) industry, the latest in its regular series of reports that offer business leaders a powerful sector overview and benchmarking tool to aid their decision-making. 

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The report segments 3,447 M&E businesses with earnings of over £1m by size and sub-sector – Electronics, Manufacturing & Equipment, Engineering, Manufacturing, Textiles, and Timber / Logging / Paper Mills – to track their performance, profitability, debt levels, borrowing capacity and M&A activity.

The report’s key findings include:

• Scale: The industry is highly concentrated, with just 7.5% of the 3,447 companies analysed accounting for 79% of total turnover. However, with larger firms’ sales marginally ahead, the data shows how effective smaller businesses have been at competing with the giants and preserving their own market share.

• Borrowing: Whilst the sector borrowing has increased slightly, the recovery in sector earnings has helped to broadly deleverage M&E businesses. Companies across all industry sub-sectors have seen an increase in average Ebitda margins over the last 12 months which vary between 1% to 2%. As with many sectors, larger more established businesses are offered more lender support which opens more options for further growth.

• Mergers & Acquisitions: 299 M&A deals were delivered during past 12 months, of which 69% were completed by UK buyers. This is particularly true for smaller deals. Outside the UK, US and Canadian buyers are the most prominent. However, this strong demand has since slowed following the Russian invasion of Ukraine and the cost-of-living crisis.

• Post pandemic predictions: The sector has recovered well from the pandemic but is facing supply chain interruption and energy commodity inflation issues, which are not yet reflected in the reported performance numbers. But with good performance, the industry is well positioned to outgrow inflation through organic expansion or by acquisition, if entrepreneurs can recognise opportunities in the midst of uncertainty.

Colin Burns, Director – Business Funding, at Shaw & Co and editor of the report, said: “We are delighted to have launched our second annual, in-depth Manufacturing & Engineering sector report. We hope it will help SME business owners benchmark their own and their peers’ performance in the sector and aid their decision-making processes. Our aim is to provide small business leaders with free access to the same market intelligence as larger blue-chip corporates, who benefit from investment banking advisors. The report will also provide SMEs with valuable insight in terms of their relative credit worthiness and attractiveness from an M&A point of view.”

A full copy of the report is available here