Britain's manufacturing industry is facing an unprecedented 'perfect storm' of post-Covid threats.

A major survey released today by Make UK and consultants RSM reveals a credit, cash and costs crunch.

Manufacturers, already facing the burden of repaying debts incurred during the international health crisis, are now grappling with the demands of an economic recovery hampered by disrupted supply chains and mounting skills shortages.

A sharp inflationary spiral is threatening to reach a level that would reach a tipping point for the business model of many, while companies are also facing a liquidity squeeze as customers and suppliers cling to cash or change their payment terms.

Almost half of companies surveyed are holding higher debt, with six in ten planning to take on more.

A third of them are worried about viability in the next two years due to debt liabilities.

Four in ten have used, or intend to use, restructuring, turnaround or insolvency professionals.

Make UK - which represents manufacturers - is urging the Government to consider payment holidays for the loans that companies took out as a precautionary measure to provide them with vital breathing space.

James Brougham, senior economist at Make UK, said: "Industry is facing the perfect storm with a raft of rapidly escalating costs combined with significant levels of debt which many companies took on as a precautionary measure just to stay afloat.

"Given the inflationary spiral shows every sign of continuing to climb, many companies fear a tipping point that could make their business models unviable."

Mike Thornton, head of manufacturing at RSM UK, said: "Manufacturers are facing a variety of headwinds from staff shortages, supply chain disruption, soaring energy prices and an increased debt burden post-Covid. This backdrop has elevated the risk profile for many UK manufacturers."

The survey suggests that a 20% increase in input costs would have an immediate impact on cashflow for 90% of companies, while for half (51%) such a scenario would have a 'catastrophic' impact.