West Midlands manufacturers see tough start to 2020

Government urged to work with manufacturers to mitigate impact of coronavirus.

West Midlands 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 today by Make UK and the business advisory firm BDO LLP showing a severe drop in exports for manufacturers UK wide.

According to the survey, West Midlands manufacturers have had a mixed start to the year, with indicators highlighting the continued difficult situation affecting the automotive sector 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, taken before the recent escalation of the economic situation, output and total orders improved from the very weak picture in the final quarter of last year to both -8% respectively, however this remained significantly below the UK average overall.

The negative balance of total orders reflects the continuing weak picture for both domestic and export orders (-13% and -14% respectively). UK-wide, export orders have plunged into negative territory for the first time in three years.

According to Make UK this 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.

Reflecting the difficult conditions, both investment intentions and recruitment remained tough with both balances (+4% and -4%), significantly below the UK average.

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 in 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.

Commenting, Charlotte Horobin, Region Director at Make UK in the Midlands Region, said: “After the rollercoaster ride of the last twelve 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.”

Jon Gilpin, head of manufacturing at BDO in the Midlands, added: “As coronavirus fears take hold and the impact on the sector’s crucial supply chains remains largely unknown, West Midlands 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.”