South: Exports hit by coronavirus impact on supply chains

Britain’s manufacturers are calling on the Government to work with industry and take whatever steps are necessary to mitigate the impact of coronavirus on international supply chains. Concerns come following a survey published by Make UK and the business advisory firm BDO LLP showing a severe drop in exports for manufacturers UK wide.

According to the survey, South East 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 added 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, conducted before the recent escalation of the economic situation, output remained healthy at a balance of +13%. However, it was half the very strong level seen at the end of last year when stocks were being run down after the end of October Brexit was delayed.

While domestic orders weakened slightly they remain above the UK average, as does the balance for export orders (+28%) which contrasts with a sharp drop into negative territory across the rest of the UK. The South East continues to benefit from investment in automation and electronics which may explain its relatively strong performance overseas.

Reflecting this mixed performance, intentions to recruit weakened markedly to just +3%, compared to the national average at +10%, though this comes after a prolonged period of strong recruitment.

Commenting, Jim Davison, region director at Make UK in the South East, 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.”

Arbinder Chatwal, head of manufacturing at BDO in Southampton, said: “As coronavirus fears take hold and the impact on the sector’s crucial supply chains remains largely unknown, South East businesses should be preparing themselves for more volatility this year.

“The dramatic fall in exports UK wide 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.”

Overall, Make UK is now forecasting manufacturing output to fall by -2.1% in 2020 (downgraded from 0.3%) though this may be revised again the light of the current situation and to grow by an anaemic 1.1% in 2021. GDP is forecast to be 1.4% in 2020.