UK subcontract manufacturers are recording strong post-pandemic order levels yet remain concerned around the ongoing impact of supply chain disruption and shortage of skilled operators, according to a new report on the sector.

Based on an in-depth survey of stakeholders working across the UK subcontract manufacturing industry, commissioned by MSC Industrial Supply Co. UK, 58% have limited or no capacity to take on further work, while a further 28% are operating at +50% capacity.

However, according to ‘The Subcon Report: What next for the backbone of British industry?’, a combination of inflationary pressures, disruptive supply chains and a challenging employment market all risk impacting the sector’s potential to truly capitalise on healthy order books.

In a bid to boost post-pandemic output, 44% of subcontractors have diversified into new markets over the past two years, while four in five also plan to invest in new equipment over the next 12 months.

Despite evident appetite for CapEx investment, engineering talent remains a major operational challenge for the sector, with 80% of those surveyed currently recruiting for at least one machine operator and only a third (34%) feeling they have sufficient in-house technical support.

Worryingly, significant time is lost dealing with a volatile supply chain. 77% of subcontractors are spending up to four hours a week sourcing industrial supplies, and three quarters of those surveyed are having to deal with as many as five different industrial suppliers. As a result, nearly a third of UK subcontract manufacturers (30%) feel their single biggest challenge is a lack of time to effectively manage their business.

James Howarth, Director of Operations – MSC Industrial Supply Co. UK, comments: “The optimism and resilience of the UK subcontract manufacturing sector is incredibly encouraging to see. However, our report also reinforced the need for new ways of thinking around talent development and supply chain management.

“The next 12 months will be critical for both the sector, and UK manufacturing as a whole. Yet, there are strategies subcontractors can deploy today to help provide short and long-term support. Whether it be consolidating their own supply base and rationalising on and off-machine consumables, or partnering with organisations that go beyond transactional relationships and can help with outsourcing tool selection and design, programming, and process improvement; ultimately, the support subcontractors need to more effectively manage the business may be closer than they realise.”

Charlotte Horobin, Region Director – Midlands & East of England, Make UK, adds: “Subcontractors are a fundamental part of the manufacturing sector, providing vital support and technical expertise right across the UK. It’s clear they have the potential to grow further with demand being so strong but, in order to do so, they will need to invest to make the step change in capacity.

“Given the subdued nature of overall business investment, government has a key role to play in providing a competitive tax system which encourages companies to invest and grow. With such a system in place it’s clear that subcontractors will continue to build on their success.”

Adam Tipper, Managing Director at Next Gen Makers, also comments: “With a well-documented shortage of time-served engineers, it is no surprise to see so many subcontractors recruiting for machinists and having to look for external technical support.

“Significant opportunity exists for subcontractors to bridge skills gaps by growing their own talent through apprenticeship schemes. This would require following the lead of OEMs or established Tier 1 suppliers by taking a longer-term strategic view on skills, including skills gap analysis and succession planning.”

To view a copy The Subcon Report, click here.