The Autumn 2024 UK Budget introduced a series of significant changes impacting the manufacturing sector. For SMEs in equipment, device, and machinery manufacturing, rising employment costs are set to create fresh challenges.
This article outlines the key budget points for manufacturing SMEs, the impact of these changes, and how investing in an MRP (Manufacturing Resource Planning) system can help offset these costs, fostering resilience through digitalisation.
Key Budget Highlights for UK Manufacturers
Increase in National Insurance Contributions (NICs)
Effective from April 2025, the Autumn 2024 budget introduces a rise in employers’ NICs from 13.8% to 15%. For manufacturers with larger workforces, especially those reliant on skilled operatives, this increase in NICs directly raises payroll costs, putting additional pressure on margins.
Reduction in the Secondary NIC Threshold
The secondary NIC threshold—the level of earnings above which employers pay NICs—will be reduced from £9,100 to £5,000. This means employers will begin paying NICs on a larger share of each employee’s salary, further increasing employment costs for manufacturers with teams of skilled workers.
National Living Wage Increase
In line with previous commitments, the budget includes a 6.7% rise in the National Living Wage. While beneficial for employees, this substantial wage increase will be an additional cost for SMEs, particularly in sectors with significant reliance on lower skilled staff.
Continued Support for Made Smarter Programme
In positive news, the Made Smarter programme will continue to receive government funding to support digital transformation in manufacturing. This initiative provides resources and incentives for SMEs to adopt technology solutions that streamline operations and improve productivity—crucial for managing rising costs effectively.
Increase in Employment Allowance
The budget has increased the Employment Allowance to £10,500 from April 2025, which helps eligible businesses reduce their NIC bill. While helpful, this measure may not fully counterbalance the overall rise in payroll costs many SMEs will experience in the above NIC increases.
Impact on SMEs in Device, Equipment, and Machinery Manufacturing
The combined effect of higher NICs, a reduced secondary threshold, and increased wage obligations could put considerable financial strain on SMEs. For businesses that rely on skilled operatives and highly specialised and labour-intensive production processes, these changes necessitate strategies to manage labour costs without sacrificing quality or output.
How an MRP System Can Help Offset Rising Labour Costs
An MRP system like Flowlens offers a range of benefits that help SME manufacturers manage costs by optimising labour, reducing errors, and enhancing overall efficiency. Here’s how it can make a tangible difference:
Multiskilling and Enhanced Workflow Management
By digitising workflows, an MRP system supports multiskilling, enabling team members to handle multiple roles and adapt to changing production demands. Automated task flows guide employees, simplifying training and maintaining productivity even with a leaner workforce.
Reducing Work Duplication
Centralising production information and automating processes help prevent redundant work, allowing staff to focus on high-value tasks and eliminate unnecessary steps. This is essential for managing labour costs efficiently in today’s cost-sensitive environment.
Improved Quality and Error Reduction
Quality control is an often-overlooked factor in labour efficiency. With an MRP system, manufacturers can reduce errors and improve product consistency, leading to fewer returns and costly repairs. By cutting down on rework and labour-intensive fixes, an MRP system enhances profitability and reliability.
- Lower Error Rates in Production: Precise, real-time production data reduces the likelihood of mistakes, lowering the risk of costly and time-consuming fixes.
- Fewer Breakdowns and Increased Reliability: Access to accurate stock and maintenance data enables better upkeep of equipment, reducing unexpected breakdowns and supporting a smoother production flow.
- Improved Customer Satisfaction: Consistent quality and fewer production errors mean a more reliable end product, leading to greater customer satisfaction, loyalty, and fewer service requests.
- More Accurate Quoting and Reduced Front-End Errors
Before production even begins, an MRP system provides accurate quoting based on up-to-date product data. This precise quoting reduces the chance of miscalculations that could lead to issues further down the line. By streamlining the front-end process, SMEs can reduce pre-production errors and set up each production run for success.
Adaptive Production Routing Based on Real-Time Stock Levels
Production schedules are only as good as the data they’re based on. An MRP system dynamically adjusts routing based on stock levels, keeping production on track and reducing time spent dealing with stock shortages or bottlenecks, improving labour efficiency.
Improved Labour Forecasting and Demand Planning
By analysing sales forecasts, stock allocations, and inventory levels, an MRP system can more accurately predict staffing needs. This means better labour management, helping SMEs avoid unnecessary overtime or surplus staffing and maintain optimal productivity without increasing headcount.
More Effective Scheduling and Resource Allocation
When production schedules change, an MRP system’s real-time tracking and flexible resource allocation help manufacturers adapt efficiently. This keeps workflows optimised, allowing staff to focus on high-priority tasks without the need for additional hires.
Enhanced Inventory and Stock Management
Accurate inventory tracking reduces the need for last-minute purchasing or emergency staffing adjustments. By keeping production flowing smoothly, an MRP system helps SMEs avoid disruptions that would otherwise increase labour demands and costs.
Conclusion: Strengthening Resilience Through Digitalisation
The Autumn 2024 budget challenges SME manufacturers with higher NICs and increased wage obligations. Adopting an MRP system offers practical ways to offset these rising costs by boosting efficiency, reducing errors, and improving quality control.
For SMEs in manufacturing, digital tools like Flowlens are no longer just enhancements; they’re essential for remaining competitive in a fast-evolving landscape. As labour and operational costs rise, investing in MRP software is a strategic step toward sustaining growth, improving profitability, and building a more resilient business.
