New analysis shows that UK electronics and telecommunication manufacturers are starting the year on a strong footing after seeing their profitability improve over the ‘Golden’ Christmas Quarter.

Mid-sized firms in the sector have benefitted from demand for products and stabilising supply chains, according to the latest Manufacturers’ Health Index, compiled quarterly by inventory management software brand Unleashed, part of the Access Group.

The report reveals data on GMROI (gross margin return on inventory) – a measure of the profits made on inventory costs – across 16 manufacturing categories. Manufacturers were also surveyed to gain first-hand insights into the specific challenges and opportunities they face.

Electronics manufacturers made an average of £2.69 for every pound invested in inventory, up from £1.54 the previous quarter. The sector saw significant growth in comparison to Q4 2022 – when it achieved £1.30 GMROI. It remains almost level with electrical manufacturers who achieved £2.68 GMROI in Q4 2023 – up from £1.85 in the previous quarter.

Jarrod Adam, Head of Product, at Unleashed, said:

“Electronics manufacturers saw profitability increase at the end of 2023, with an impressive improvement in the final quarter.

“Overall, the businesses we surveyed across different manufacturing categories were optimistic about 2024, with almost three-quarters saying they expect demand to grow this year.”

Bigger picture: manufacturing sector returns to health

Unleashed’s report showed that the UK’s manufacturing sector has made a dramatic recovery – recording its best performance in more than two and a half years during the final quarter of 2023.

Firms made an average of £2.33 for every pound invested in inventory, up from £1.98 the previous quarter and £2.05 in the same period of 2022.

All but four of the manufacturing categories analysed saw an uplift in profitability during Q4, with clothing manufacturers and the energy chemicals sector storming ahead with £4.53 and £3.30 respectively.

At the other end of the scale, the most dramatic fall was in plastics and rubber, which saw its profits on inventory drop to £1.16 from £2.65. Health and medical manufacturers, and cosmetics and personal care were both down by 16p and 8p.

“The improvements in profitability show how well mid-sized manufacturers in the UK have rallied following the seemingly endless economic and supply chain uncertainty of the past few years,” said Adam.

“In navigating the supply chain and economic challenges they’ve faced, many firms have embraced technology to refine their inventory management processes, enabling them to achieve better margins on their inventory spend.”

For more information and for the full research, visit: www.unleashedsoftware.com/industry/manufacturing-inventory-management/manufacturinghealthindex

Source