Saturday, July 11, 2020

Growth for UK manufacturing, but Covid-19 disrupts supply chains

Although growth of manufacturing output accelerated to a ten-month high in February, the outbreak of Covid-19 is leading to supply chain disruptions.

The ongoing coronavirus outbreak has led to raw material delivery delays, rising input costs and increased pressure on stocks of purchasers.

According to the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) manufacturing output increased at the fastest pace since April 2019, as growth strengthened in both the consumer and intermediate goods sectors. In contrast, the downturn at investment goods producers continued.

The main factor underlying output growth was improved intakes of new work. Business optimism also strengthened, hitting a nine-month high, reflecting planned new investment, product launches, improved market conditions and a more settled political outlook.

February saw the level of new work received expand for the second successive month. The rate of increase accelerated to an 11-month high, as reduced levels of political uncertainty and successful promotional activities aided a further recovery in domestic market strength.

There were also some reports of manufacturers receiving orders redirected from clients experiencing supply-chain issues.

Less positive news was provided by the trend in new export business, with overseas demand decreasing for the fourth successive month in February.

Companies reported reduced new work intakes from Asia (especially China) due to the Covid-19 outbreak. There were also reports of efforts to re-route supply chains away from the UK (following Brexit) contributing to weaker demand from the EU.

The effects of the COVID-19 outbreak had a noticeable impact on supply chains during February. Average vendor lead times lengthened to the greatest extent since July 2018, while the eight-point drop in the level of the seasonally adjusted Suppliers’ Delivery Times Index was the largest in the 28-year survey history. Recent storms and flooding in the UK also had an impact.

Delays in the delivery of inputs and companies burning through Brexit safety stocks led to increased pressure on inventories. Stocks of purchases fell at the fastest rate in over seven years. Stocks of finished goods and purchasing activity were also lower.

Shortages of certain raw materials led to increased input prices, part of which was passed on to clients through higher output charges.

Manufacturing employment resumed its downwards trend in February, falling for the tenth time during the past 11 months. The decline was centred on the investment goods sector, as jobs growth was seen at both consumer and intermediate goods producers.

“The UK manufacturing sector remained in recovery mode in February, as reduced levels of political uncertainty following last year’s general election translated into further growth of output and new orders,” said Rob Dobson, Director at IHS Markit, which compiles the survey.

“Supply-chain disruptions were emerging rapidly, however, as the Covid-19 outbreak led to a substantial lengthening of supplier lead times, raw material shortages, reduced inventories of inputs, rising input costs and reduced export orders from Asia and China in particular.

“The expansion of output was nonetheless the fastest since April 2019, as stronger demand from the domestic market led to the steepest increase in new work in 11 months. Business optimism also improved to a nine-month high. However, the upturn remains confined to the consumer and intermediate goods sectors, as the downturn at investment goods producers continued.

“This suggests that business confidence levels have yet to recover sufficiently to support a sustained rise in capital spending. With supply-chain headwinds rising, and trade negotiations with the EU starting, it remains to be seen whether the recovery can stay on course during the coming months.”

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 lockdown having a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £33.60 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.






Latest news

New contractor sought as Coalville Newmarket construction pushed forward

North West Leicestershire District Council (NWLDC) is looking to appoint a new contractor to finish the nearly-complete Newmarket in Coalville. Westone Housing Ltd had been...

University Centre completes in Grantham

Work to create a University Centre to deliver higher education and skills training in Grantham is now complete. Degrees, high-level apprenticeships, diplomas and short courses...

Leicester’s City Mayor lobbies Government for extra business support

Leicester's City Mayor is lobbying Government to provide more support to local businesses after it emerged the Government does not intend to provide extra...

Success in adaptation – stories shared: By Fiona Duncan-Steer, founder of RSViP

Fiona Duncan-Steer, founder of RSViP Business Networking Agency, discusses adaptation in lockdown. Topics I have been immersed in recently, as I am sure many of...

New partnership to link good causes, businesses and radio

Derbyshire-based Investors in Community has joined forces with LLR Media (Love Local Radio Media) to form a new partnership. The charitable giving platform helps to...

Related news

Improvement notice served to Rolls-Royce after safety breaches at Derby site

The Office for Nuclear Regulation (ONR) has served an Improvement Notice on Rolls-Royce Submarines Ltd (RRSL) for procedural safety breaches at its Derby site. The...

New contractor sought as Coalville Newmarket construction pushed forward

North West Leicestershire District Council (NWLDC) is looking to appoint a new contractor to finish the nearly-complete Newmarket in Coalville. Westone Housing Ltd had been...

University Centre completes in Grantham

Work to create a University Centre to deliver higher education and skills training in Grantham is now complete. Degrees, high-level apprenticeships, diplomas and short courses...

Leicester’s City Mayor lobbies Government for extra business support

Leicester's City Mayor is lobbying Government to provide more support to local businesses after it emerged the Government does not intend to provide extra...

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close