Coronavirus sees manufacturing ‘nosedive’

1 May 2020

Manufacturing production, new orders and employment contracted at the fastest rates in 28 years, according to the latest PMI.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index fell to a record low of 32.6 in April, down from 47.8 in March. 

Contractions were felt across the sector, with declines seen across the consumer, intermediate and investment goods subsectors.

Firms linked the declines to company closures, weak domestic and global demand, and labour shortages as a result of job losses and staff furloughs. 

In the few cases where companies reported an increase in either output or new orders, this was generally from those already producing, or repurposed to produce, medical and food-related goods.

Vendor lead times lengthened to the greatest extent in the 28-year survey history as a result of logistical issues, border difficulties for overseas goods and delays to shipping and air freight. 

Some manufacturers experienced constraints due to closures or capacity shortages at suppliers. 

Duncan Brock, group director at the CIPS, said: “Last month’s dismal predictions became a reality in April as the manufacturing sector took an abrupt nosedive into the red with purchasing activity, production and new orders falling at the fastest rates in the near 30-year survey history.

“There was only one reason for such a ruinous result – the Covid-19 coronavirus pandemic, which affected supply chains from beginning to end. Domestic customers deferred orders and export customers thrashed around trying to source a dwindling number of raw materials to keep their supply chains operating before finally giving up. Complicated by government edicts terminating normal business activity, UK companies were forced to put factories on lockdown anyway, bringing their operations to a complete stop. 

“With the expectation of potential price rises to come, some firms resorted to stockpiling measures in an attempt to beat future supply pandemonium, which only exacerbated the problem of dysfunctional supply chains. Some sectors such as food and medical supplies were able to continue but obstacles in logistics and transportation as borders closed and social restrictions were implemented meant usual activity was beyond difficult.”

But he added: “There is no comparable time in history to make predictions against but as production ramps up again in the Far East, the sector remained optimistic that in a year’s time the operating environment will resemble some new normality.”

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