Manufacturers ‘knocked sideways’ by coronavirus

1 April 2020

The outbreak of Covid-19 has led to the longest supplier lead times in 28 years, according to the latest PMI. 

The IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index fell to 47.8 in March, down from 51.7 in February 2020 and against the no-change 50 reading, as output fell to the greatest extent since July 2012.

Downturns in output and new orders were widespread. Manufacturers reported disruption, lower market confidence and company shutdowns had contributed to drops in production and new business.

Restrictions around the world placed in response to the virus had a noticeable impact on supply chains. Transport disruption, delays in receiving goods from overseas and shortages of raw materials led to the longest supplier lead times in 28 years, disrupting production lines. 

Purchasing activity was also reduced during March as manufacturers linked lower levels of input buying to the outbreak, falling output requirements, reduced demand and efforts to protect cash flow. 

Holdings of inventory also decreased, reflecting production delays and longer times taken to receive input purchases. However, some firms reported attempts to build up stocks in response to the uncertainty.

Duncan Brock, group director at the CIPS, said: “The manufacturing sector was knocked sideways by the impact of Covid-19 and into contraction territory, experiencing some of the most challenging trading conditions since PMI records began.

“Closed borders, significant shipping delays and a reluctance from clients to authorise new instructions resulted in the sharpest contraction in orders from domestic and overseas markets since 2012.

“Business optimism dropped to historical lows as manufacturers struggled to get essential raw materials, whilst some fortunate few were able to stockpile to a limited extent before the opportunities vanished.

“With supplier delivery times at their worst for 28 years, these fast-moving challenges affected every link in manufacturing supply chains and on an unprecedented scale. Inevitably, job creation suffered as a result as employment was reduced at the fastest pace since 2009.

“With supply chains crumbling around the world, we can only expect a worsening outlook next month as increasingly necessary lockdown measures squeeze manufacturing production. Only creative and agile thinking, new products and approaches will see the sector through the turbulence ahead.”

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