Kreston Reeves and Lloyds Bank launch Southern Manufacturing Forum

Kreston Reeves and Lloyds Bank were joined by 30 plus manufacturers from across Sussex, Surrey and Hampshire for the launch of the Southern Manufacturing Forum.

With a long and successful history of advising ambitious and well-established manufacturers, the Kreston Reeves and Lloyds Bank Southern Manufacturing Forum brings clients and advisers together to discuss the big challenges they face and how they might respond.

It is, however, business leaders themselves that drive the discussion, supporting each other in reaching decisions that they can take back to their businesses.

The launch of the Southern Manufacturing Forum follows the successful Kent Manufacturing Forum that is now in its 15th year. Both groups provide invaluable peer support, answers to the challenges business face and trading opportunities.

The manufacturing sector in Southern England is vibrant and diverse, spanning high value electronics and medical devices to musical instruments and stone memorials. Many, however, share the same challenges

Manufacturers heard from both Chairman of the Kent Manufacturing Forum Shaun Kelly and manufacturing sector lead at Kreston Reeves Mark Attwood. Lloyds Bank Regional Head for Manufacturing Simon Fraser welcomed guests before introducing Daniel Skelton, Head SME South East Financial Markets at Lloyds Bank.

A ‘perma-crisis’ economy is the new normal

A central theme from the Lloyds Bank presentation was that businesses are no longer operating in a stable economic cycle, but in what was described as a state of permanent crisis, or ‘perma-crisis’. Over the past 15 years, manufacturers have faced a succession of shocks: the financial crisis, Eurozone instability, Brexit, Covid-19, the war in Ukraine, the UK mini-budget and now ongoing geopolitical tensions. Rather than discrete events, these are now seen as a continuous backdrop to doing business.

This has two important implications. First, traditional forecasting has become significantly less reliable. Markets are increasingly reactive not just to data, but to political rhetoric and fast-moving global developments, making conditions harder to predict even in the short term.

Second, the idea of a return to pre-Covid stability looks unlikely. Businesses are instead operating in an environment where uncertainty is persistent rather than episodic.

For manufacturers, it means a shift of focus from prediction to resilience. Planning assumptions need to be more flexible, with greater emphasis on scenario modelling, liquidity management and operational agility. The businesses that perform best are not those trying to ‘time’ the market, but those structured to absorb shocks and adapt quickly when conditions change.

‘Higher for longer’ interest rates are reshaping decision-making

Another key message was that we are no longer in an era of ultra‑low interest rates, and businesses should plan on the basis that borrowing costs may continue to remain structurally higher than in the 2010s.

While inflation has moderated from its peak, it remains above the Bank of England’s 2% target, and there is increasing expectation that interest rates may not fall as quickly as previously hoped.

For manufacturers, this has direct consequences for investment, funding and profitability. The cost of capital is now a much more material factor in decision-making, affecting everything from equipment purchases to expansion plans. At the same time, lenders and investors are placing greater scrutiny on cash flow resilience and covenant strength.

However, there is also evidence that businesses are adapting. Many are becoming more comfortable operating in this environment, recalibrating expectations and continuing to invest where there is a clear strategic rationale. Confidence indicators, while sensitive to shocks, have shown signs of recovery as firms adjust to the ‘new normal’.

The practical takeaway is that financial strategy needs to be more proactive. Interest rate exposure, debt structure and refinancing risk should be actively managed, rather than treated as a background consideration. In a higher-rate environment, financial discipline becomes a competitive advantage.

Volatility in currencies, energy and supply chains demands active risk management

The third major theme was the extent of ongoing volatility across currencies, commodities and global supply chains, and the need for manufacturers to respond more actively to it.

Exchange rates, particularly sterling against the dollar and euro, have shown sharp and often unpredictable movements, influenced by global political developments as much as economic fundamentals.

At the same time, energy prices and key input costs remain highly sensitive to geopolitical events. Disruptions to shipping routes and raw material flows can quickly translate into margin pressure, with cost increases feeding through supply chains and ultimately into pricing. The presentation highlighted how quickly oil prices and logistics constraints can shift, creating knock-on effects across manufacturing sectors.

In response, many manufacturers are changing their approach. There is a growing emphasis on diversification of suppliers, reshoring or nearshoring elements of production, and holding more strategic inventory. Currency and commodity risk management is also becoming more embedded, with businesses focusing less on trying to ‘beat the market’ and more on protecting margins.

For manufacturing leaders, the key message is clear: volatility is not a temporary disruption but a structural feature of the environment. Managing that risk actively – across supply chains, pricing and financial exposure is now essential to maintaining stability and competitiveness.

The next Southern Manufacturing forum meeting is taking place on Thursday 2 July. For more information or to register your place click here.