South West manufacturers are calling on the Government to work with industry and take whatever steps are necessary to mitigate the impact of coronavirus as exports and supply chains are hit by the pandemic.
Concerns come following a survey published by manufacturers’ organisation Make UK and the business advisory firm BDO LLP showing a severe drop in exports for factories.
According to the survey, South West manufacturers have had a mixed start to the year, with indicators showing a more difficult trading environment and the initial impacts of the coronavirus on supply chains.
Make UK and BDO said the true impact of coronavirus may not yet have been recorded but the next few weeks should shed some light on how the sector is responding to disruptions that are set to send shockwaves through industry supply chains.
According to the Q1 Manufacturing Outlook survey, taken before the escalation of the economic situation, output dropped sharply from a balance of +16% in the final quarter of last year to -7% this quarter as stock were wound down from last Autumn.
Total orders picked up sharply however from a balanced of -11% to +20% on the back of a strong domestic order book.
By contrast export orders fell sharply, which very much mirrors the national picture where exports have fallen overall.
According to Make UK the fall in export orders makes it critical for manufacturers that a positive trade deal is agreed with the EU, especially as a separate snap poll conducted nationally by Make UK reports that over a third of UK companies (36%) said that sentiment towards them from EU customers had turned more negative since the EU exit.
Whilst investment intentions and business confidence indicators had begun to improve, it’s likely they will have been knocked off course.
In addition, job prospects remained tough with the employment balance flat this quarter.
Overall, Make UK is now forecasting manufacturing output to fall by -2.1% in 2020, which is downgraded from 0.3%, though this may be revised again in the light of the economic situation and to grow by an anaemic 1.1% in 2021. GDP is forecast to be 1.4% in 2020.
Jim Davison, region director at Make UK in the South West, said: “After the rollercoaster ride of the last 12 months and a series of stockpiling highs and investment lows the election result had at least provided some degree of political certainty and a prospect of a return to cyclical economic normality, but the escalation of coronavirus is likely to knock that off course.
“Even before the current situation developed we were facing potentially difficult trade talks where the clock is running down fast. Now it is vital that Government works with industry to limit the damage to industry and take whatever steps are necessary to safeguard skills in particular.”
Matthew Sewell, head of manufacturing at BDO in the South West, said: “As coronavirus fears take hold and the impact on the sector’s crucial supply chains remains largely unknown, South West businesses should be preparing themselves for more volatility this year.
“The dramatic fall in exports only exacerbates the challenges to come. There is no doubt that the sector needs the Government to step up and deliver a clear and supportive industrial strategy to help navigate the choppy waters ahead.”
.jpg?w=600)
