Overseas customers 'tired of waiting for undelivered goods'

1 November 2021

Rising supply chain disruption, staff shortages, and reduced export work put a brake on manufacturing growth in October, according to the latest PMI.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index rose to 57.8 in October, up on 57.1 in September and against the no-change 50 reading. Though this represented the first rise in the index in five months, production increased only marginally as companies reported shortages of raw materials and certain skills.

Almost 62% of manufacturers expected to increase output over the coming year, due to a stronger global and domestic economy and reduced disruption from Brexit and Covid-19.

Respondents also anticipated increased investment in automation.

Longer lead times caused by port delays and freight capacity issues led to overseas clients cancelling or postponing orders, respondents said.

However the relative strength of the domestic market helped offset weaknesses in overseas demand.

Overall, new orders rose slightly quicker due to economic growth and clients purchasing in greater volume or earlier to forestall potential supply chain delays.

Duncan Brock, group director at CIPS, said: “The issue here is not one of supply, as goods and materials are being produced, but that logistics challenges have become a nightmare for some companies.”

He added: “This modest expansion was buoyed up by domestic demand as new order levels improved. However, pipelines of export work slipped back as customers in the EU and beyond became tired of waiting for their undelivered goods and resorted to cancellations.”

Brock said the spotlight has now shifted to the quality of workforces.

“If businesses are forced to compromise on skills to get backlogged jobs out of the door, there may be further drags on delivery times and quality as business are spooked into making decisions just to adapt and survive,” he said.

Maddie Walker, Industry X practice lead at Accenture UKI, said the PMI showed how factors including the shortage of HGV drivers and rising costs had slowed growth.

“A demanding Christmas period is now on the horizon – with consumers releasing pent-up spending and headlines about shortages potentially triggering unusual buying patterns,” she said.

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