Restructuring in the manufacturing sector: what does the future hold?
What is the current state of play?
There are now fewer overseas products coming into Britain and more manufacturers are better able to supply their local markets, which in turn has helped to build better relationships that had previously been undermined by pricing issues. As such, customers are being reminded once again of the quality UK manufacturing has to offer. Diversification has also been very encouraging, with firms pivoting effectively to address new demands. A lot of the machinery used in automotive manufacturing, particularly at the higher end, has been used to produce complex products for the NHS. Being agile and diversifying quickly has enabled many businesses to maintain good financial health. Many have also revamped their operations, adopting new technologies to overcome the challenges of social distancing and to address any future uncertainties around the workforce. But, for those that haven’t yet seen their order books begin to return to strength, there are understandable concerns around the limitations of government support. For example, manufacturers haven’t received some of the benefits such as rates reductions that the retail sector has, despite similar demand issues.
Like many other industries, manufacturing is facing significant challenges on a range of fronts; not least the impact of the COVID-19 pandemic and changes to the UK’s relationship with the European Union (EU). Having endured a difficult 2019, the arrival of the pandemic severely undermined any returning confidence that had materialised within the sector at the start of 2020. Despite this, manufacturers across the UK demonstrated their underlying resilience, bouncing back to growth following the first national lockdown. However, for many that growth is now slowing, and businesses are concerned by the challenges that lie ahead. These include widespread issues across transport, with demand plunging within core sub-sectors such as aviation and automotive. The same is true for those operating in energy. While factory production supplying these sectors is unlikely to be restricted again as severely as it was during the early throes of the pandemic, the evolution of the economy and consumer behaviour in these areas since suggests that these challenges will persist for the next 12 months at the very least. Already, we are seeing manufacturing firms taking action to streamline their operations to mitigate the reduced demand, with further far-reaching job cuts an unfortunate consequence. That being said, there remains a number of positives for the sector as it looks to meet changing demand in other areas. For example, we have seen a surge in demand for food products, cleaning chemicals and medical and protective equipment. Furthermore, government policy is directing the economy towards a green industrial revolution, where offshore energy production, electric vehicles and low-carbon plane and shipbuilding are expected to revitalise the UK’s manufacturing industry.
Despite its wide-ranging implications, many manufacturers are enduring the effects of the pandemic very well and have shown great resilience. Allan Kelly Restructuring Advisory
For the internal market, the pandemic has created some unexpected improvements, as firms have been forced to address supply chain resilience while benefiting from reduced international competition in the UK. Steven Ross Restructuring Advisory
How has the COVID-19 pandemic impacted the sector?
Despite its wide-ranging implications, many manufacturers are enduring the effects of the pandemic very well and have shown great resilience. But ultimately some firms have been benefiting from changing consumer behaviour and others really struggling. As noted previously, the impact largely depends on the sub- sector that businesses are supplying into. For the internal market, the pandemic has created some unexpected improvements, as firms have been forced to address supply chain resilience while benefiting from reduced international competition in the UK.
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