Most small UK factories take on debt to cope with COVID hit - survey

LONDON (Reuters) - More than half of Britain's small and medium-sized manufacturers have taken on debt to cope with reduced demand and disruption to supply chains caused by the COVID-19 pandemic, a survey showed on Monday.

The Manufacturing Growth Programme (MGP), an advisory service for smaller industrial companies, said 54% of manufacturers had taken out loans - something that could crimp future investment as they repay their debt.

Around six out of 10 manufacturers surveyed by MGP said orders had dropped and that supplier times had lengthened.

Britain's economy suffered a record slump in the second quarter and data last week showed manufacturing output remained about 9% lower than its pre-pandemic level as of August.

"The results raise important questions about resilience... particularly given the uncertainties in the economy," said Martin Coats, MGP's managing director.

"Everyone was aware of the drop in orders due to the national lockdown and global issues, but what hasn't been so well documented is the production problems some companies are facing and how disruption is causing major issues with pricing, costs and delivery performance."

Coats said the government urgently needed to look at targeted support for the supply chain to build a sustained recovery.

Small and medium companies across the economy have taken out more than 50 billion pounds ($65 billion) of state-backed loans under the government's COVID-19 lending programmes.

MGP's survey covered 289 companies during August and September.

(Reporting by Andy Bruce; editing by Stephen Addison)