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Thu, 9 July 2020

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The manufacturing sector will need targeted support to stop supply chains collapsing

The manufacturing sector will need targeted support to stop supply chains collapsing

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3 min read

Manufacturing relies on demand. Although many manufacturers have remained open, they will need help to recover from this crisis

The Covid-19 crisis has produced challenges in this country the likes of which have not been seen for generations. Indeed, no part of society has been left untouched by this deadly virus. Many families have lost loved ones, and while the measures implemented by the Government have slowed the spread and protected the NHS, other economic impacts are now becoming apparent. 

As the virus spread across the globe, the simultaneous freezing of trade and locking down of economies has had a severe knock-on effect on many UK businesses. Thankfully, the Government has moved quickly to support industry and secure livelihoods. Working together with trade unions and business, they have implemented a range of schemes to support jobs and businesses as we navigate our way through this crisis.

The manufacturing sector has stepped up to help, with many businesses adapting and innovating to produce ventilators and personal protective equipment for the NHS. In my own constituency of Rugby, Autins have been producing safety facemasks from their microfibre Neptune – normally used for sound insulation in cars. Quite rightly, the secretary of state for BEIS, Alok Sharma, wrote to manufacturers and encouraged them to continue production. However, many have faced the challenge of a significant reduction in demand.

Industry sector body Make UK found that 90% of manufacturers have continued to operate through the crisis, but that more than 80% of companies have seen orders fall and over 20% have seen orders more than halved. Manufacturing relies on demand for it to be able to produce and supply goods, so although many manufacturers have remained open, they will need help to recover from this crisis.

Manufacturing is different to – for instance – non-essential retail. As soon as the Government gives the green light for shops to reopen, there will be an immediate client base to serve with pent-up demand. Manufacturing, conversely, will need demand to increase which will only happen once business has resumed across the wider economy and globe.  As a result, manufacturers will need to be supported through the lag between the economy reopening and demand picking up. This is even starker in some sectors which are likely to face a potential lag of years, not months. 

I recently chaired a meeting of the All-Party Parliamentary Manufacturing Group, in which Deloitte explained that the civil aviation sector may be facing up to four years before returning to pre-crisis levels. This in turn means an even longer lag for the major plane manufacturers supplying the airlines, and longer again for those further down the supply chains. We also heard from an SME manufacturer whose customers work in the events sector, which has also been heavily affected by the current situation and shows no near-term sign of returning to pre-crisis levels of demand.

As we recover from this crisis, the Government should be mindful of the challenge of demand facing the manufacturing sector, and work to provide the right support in both the short and long term as companies face gaps in their order books. Manufacturers across the country have stepped up to help protect us in our time of need, and it will be important to help them to make it through too. 

 

Mark Pawsey is Conservative MP for Rugby and chair of the All-Party Parliamentary Manufacturing Group

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