Helping small manufacturers grow into large businesses would add £83bn to manufacturing GVA over the next decade. But doing so requires strategic planning, the right support and a culture of collaboration and knowledge sharing.
Small and medium-sized enterprises (SMEs) are the engine of UK manufacturing, accounting for 99% of all businesses. Of these, two in three (64%) have bold growth ambitions for the next five to ten years, promising significant economic benefits.
If these ambitious SMEs were to grow to reach the minimum annual turnover of a large company (£36m), this could add £219bn in annual turnover to the sector – contributing almost £83bn to total industry output.
.jpg)
Yet, SMEs face numerous barriers limiting their growth potential. A new report identifies these obstacles and outlines recommendations to overcome them.
Key Barriers Stalling SME Growth
Labour & Skills
Workforce shortages, particularly in engineering and leadership skills, remain the top challenges for SMEs seeking growth. The number of apprenticeship starts has dropped by nearly half (42%) since the Apprentice Levy was introduced in April 2017, highlighting an urgent need for reform.
Beyond traditional skills gaps, many SMEs lack the digital expertise needed to adopt new technologies and improve operational efficiency. Innovate UK, the Catapult network and programmes such as Made Smarter exist to help, yet research suggests awareness remains low. To address this, SMEs must proactively engage with these initiatives, and industry bodies must improve their visibility.
.jpg)
Access to Finance
Four in five SMEs struggle to secure financing, particularly during early growth. High interest rates, strict lending criteria, insufficient collateral and complex application processes are making the situation more difficult.
Existing support for SMEs comes primarily from The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). Both government initiatives aim to encourage investment in small and early-stage companies by offering tax incentives to investors, but businesses must be less than seven years old to access them.
Setting up a factory and training staff takes more than seven years, so most start-up manufacturers are never able to access funds aimed at helping them grow. Removing the arbitrary age limit would unlock investment for businesses with genuine growth potential.
Exporting
For the government to achieve its ambition of the UK having the highest growth in the G7, exports must increase. Yet, only 20% of manufacturers are direct exporters. Barriers include a poor grasp of local regulations and bureaucracy and limited knowledge of related advice and finance support.
To boost exports, SMEs should focus on diversifying their product range to access new markets, alongside hiring talent with relevant export experience and forming strategic partnerships with local agents/distributors.
.jpg)
Awareness
Business engagement with public support is at an all-time low. Research shows there are more than 100 existing mechanisms to support manufacturers and other industries. The breadth and diversity of support can mean there’s something for every business, but it creates a complex, fragmented and confusing landscape to navigate. Despite being hungry for growth, few SME manufacturers have the internal resources to identify which schemes would be relevant for them and when.
Unsurprisingly, schemes with the highest engagement are those that are well-established and relatively simple to apply for. Simplifying application processes and consolidating information into a single, user-friendly platform would significantly improve uptake.
.jpg)
Strategic Actions for SMEs to Unlock Growth
1. Develop a Structured Growth Plan – Create a clear, phased roadmap for expansion, incorporating workforce development, technology adoption and financial planning. Engaging with business mentors, industry peers and specialists can provide targeted expert guidance.
2. Enhance Workforce Development – Collaborate with education providers to help shape your future skills pipeline, and engage in apprenticeship schemes, Knowledge Transfer Partnerships (KTPs) and the leadership-focused Help to Grow programme.
3. Maximise Operational Efficiency – Embrace digital tools, automation and data insights to streamline operations, gain visibility into production, improve decision-making and drive productivity.
4. Expand Market Reach Through Networking – Join industry networks, attend trade events and participate in peer-to-peer learning groups to exchange best practices, gain strategic insights and generate new business opportunities. Membership organisations like Made in Group enable businesses to connect, share knowledge and collectively advocate for industry-wide improvements.
5. Back Campaigns for Change – Add your voice in shaping policy by contributing to industry consultation, joining industry associations and working collectively to influence government decisions on funding, trade policies and skills development.
For example, sign the petition calling for the appointment of an experienced, respected and trusted industry expert to represent manufacturing businesses and champion their needs - https://petition.parliament.uk/petitions/710642/signatures/new
Policy Recommendations to Support SME Growth
To unlock the growth potential of small manufacturers, the government must take decisive action in key areas:
- Improve access to skills funding provision with the transition to the Apprenticeship Levy (soon to be renamed the Growth and Skills Levy).
- Provide long-term and strategic support for the Made Smarter Adoption programme to help small businesses engage with digital transformation.
- Introduce a super-growth capital allowance (150%), and expand the Growth Enterprise Investment Scheme (GEIS) to help SMEs scale.
- Establish an Export Development Scheme to improve access to trade finance, and expand Export Finance services to include additional risk management support.
- Create a digital platform consolidating all business support schemes into one easily accessible hub, reducing bureaucracy and improving uptake.
- Use HMCR and ONS data to micro-target businesses with tailored support and investment opportunities, making it easier for SMEs to access relevant schemes.
- Increase the proportion of public sector contracts awarded to UK-based supply chains, strengthening the domestic manufacturing base and ensuring more jobs, investment and innovation stays within the UK economy.
SME manufacturers have the ambition, capability and potential to drive a new wave of industrial growth in the UK. However, realising this requires a combination of industry collaboration, government intervention and proactive engagement from SMEs themselves.
At Made in Group, we are committed to supporting SME manufacturers on their growth journey. Our network connects like-minded businesses, providing access to peer learning, best practices, new approaches and strategic insights.
Through our factory tours, knowledge-sharing platform and advocacy efforts, we are helping SMEs navigate challenges, open doors to new opportunities and scale successfully.
Now is the time to act. Whether through adopting new technologies, building a talent pipeline or amplifying our collective influence to drive meaningful change at both industry and policy levels, SME manufacturers must take bold steps to unlock their full growth potential.
By working together, we can turn ambition into impact and drive real, lasting change for UK manufacturing.
*Figures and infographics from Make UK and Civitas – The Growth Mission: A Blueprint for Scaling Up SME Manufacturers
**Header image by Nattanan Kanchanaprat from Pixabay