07 June, 2021
The UK manufacturing sector has had a very mixed response to the Covid-19 pandemic, with some businesses struggling, and others thriving, either due to being in key sector supply chains or by being able to pivot to adapt to the "new normal". As we start to near the beginning of the end of this difficult 18-month period, thoughts are turning to the future, and what that new landscape will look like for this key North West industry sector.
A recent survey looked into this and revealed that, across the whole of the UK, 75% of businesses within the manufacturing sector are planning to invest less or the same as planned before the pandemic hit, with only 36% of such businesses envisaging business to return to pre-Covid levels within the next 12 months.
However, when you narrow down the findings and focus on the North West specifically, the results looked far less doom and gloom than the national picture.
Compared to the national average of 36%, 86% of North West businesses expected business to return to pre-Covid levels within the next 12 months and only 45% are planning to spend "significantly less" in the next 12 months (compared to the national average of 75%). This level of local optimism mirrors that in the region after the banking crisis of 2008/9, where the region bucked broader national trends and found ways to adapt and flourish among one of the most difficult recessions of recent times.
It would appear that there is a spirit of cautious optimism among North West based manufacturers, with many looking to the predicted improved domestic demand once restrictions begin to ease, and the economy and market start to try and return to normal. Notably, the survey had asked similar questions 6 months ago, and the more recent results show a much greater level of positivity as we near the end of sweeping restrictions in the Summer than previously.
Despite just under half of North West businesses planning to scale back on investments, the recent introduction of the super deduction tax break may sway some business owners to invest. However, some may choose to concentrate on current working capital, which will be vital to meet expected increases in demand.
The survey also found that the majority of North West manufacturers felt that enough had been done to support them, in terms of government support, with praise bestowed on the flexibility of the furlough scheme. It remains to be seen how businesses that have struggled to keep their heads above water will cope once that valuable support is withdrawn in the Autumn.
However just under a quarter felt the government could have done more for them, in particular where struggles with imports and exports impacted the business and the lines between pandemic and Brexit effect were blurred. Above the national average, 77% responded to say that increased paperwork due to the Brexit agreement was a hindrance to business practices. Whilst it seems the initial commotion post-Brexit has settled down, shipping delays are still causing an issue for importers and exporters, in addition to those impacted by recent physical disruptions in trade routes. Struggles to sources raw materials, accompanied by increased lead times in the supply chain are putting constraints on the ability to service expected demand. On the whole, these issues have been described as short-term inconveniences as opposed to ongoing problems and are outweighed by increasing confidence in the sector.
The feeling is that labour-intensive workplaces have been most affected, with some high profile cases of 'super spreader' events having been reported in, for example, food factories. However, the UK is a relatively high value manufacturing country and largely automated factories mean that social distancing will have been possible in most facilities. This is borne out by the survey results in which three-quarters of businesses said their output was affected only a little or not at all by enforced social distancing rules.
Whilst many in the North West region have been under some form of restriction or other since October 2020, most manufacturers were able to continue trading, adapting their processes as appropriate. For example, Silicone Engineering Limited, a manufacturer of silicone rubber sheets, rolls and tubing, from Blackburn, became a COVID-19 component producer, supporting the NHS with the production of solid silicone sheeting used for specialist life-saving medical applications. As a result, the company implemented new processes and systems, to ensure they reached the healthcare frontline as soon as possible. All COVID-19 component enquiries and orders were given special priority and fast-track delivery.
Further examples of how North West businesses have adapted to the Covid-19 pandemic are available in the Forbes Reinvention and Resilience Top 50.
For more information contact David Filmer in our Manufacturing & Engineering department via email or phone on 0333 207 1132. Alternatively send any question through to Forbes Solicitors via our online Contact Form.