Bleak outlook for South West manufacturers as COVID-19 wreaks havoc

Small and medium-sized manufacturers in the South West are being hit hard by the COVID-19 pandemic with 87% of companies identifying a significant decrease in production volumes, a study has found.

The initial findings of the Manufacturing Barometer, which surveys firms across England, reveals a stark picture of how the coronavirus is already affecting industrial confidence and future predictions around safeguarding jobs.

Conducted by South West Manufacturing Advisory Service (SWMAS) and the Manufacturing Growth Programme (MGP), the report shows almost nine out of 10 of respondents expect sales to drop during the next six months, while more than half predict the need to cut staff – despite the Government’s furloughing scheme being introduced to boost employee retention and preserve businesses.

There also appears to be continued confusion over the business support available. Nearly three quarters of firms questioned either don’t think the assistance being offered is sufficient – or are unsure of the help they can access.

Unsurprisingly, almost 90 per cent said that financial support was needed most, followed by overcoming supply chain disruption and detailed business advice on how to cope with the pandemic.

Simon Howes, managing director of South West Manufacturing Advisory Service (SWMAS)

Simon Howes, managing director of SWMAS, said: “COVID-19 is already having a significant impact on the majority of SME manufacturers surveyed and many of those who have yet to experience a change are expecting this global health and economic crisis to affect their business over the coming weeks and months.

“Unlike many sectors, our manufacturing industry cannot be carried out remotely as it relies on physical interaction with machinery and parts.

“Current restrictions and lockdown measures in the UK mean capacity is reduced, and this is reflected in four-fifths of companies seeing a reduction in staff attendance.

COVID-19 case study – Tex Plastics, Barnstaple 

Tex Plastics, based in Barnstaple, designs and supplies plastic injection moulding to a number of markets including life critical, and have reported that COVID-19 is resulting in supply chain challenges.

“Several of our existing customers are closed so are no longer taking orders,” explained production manager David Smith.

“Completed orders cannot be shipped to the end user, so this is having an impact on our income and placing a considerable strain on cash flow. As this pandemic continues to negatively affect all aspects of the business, the need to furlough staff becomes more and more likely.

“Clarification on some of the financial support available to businesses would be welcome, including a clear understanding of when the Government will be reimbursing the 80% cost for furloughed staff. As a result of the impact on cash flow, many companies will struggle to cover this and other expenses throughout the coming months.”

“Companies who may still be able to produce goods are still reliant on their supply chains and a massive 80% of businesses questioned are either struggling to source materials or have seen reduced orders from customers since the COVID-19 crisis began.

“Just over half of respondents have said that restrictions on exporting and importing are having an impact on their operations, so whether they trade nationally or worldwide, many small and medium-sized UK manufacturers are uncertain of what the future holds.

COVID-19 case study – Core Lighting, Gloucester

Phil Ion is managing director of Gloucester-based CORE Lighting, a specialist supplier to the entertainment sector. He is concerned about future orders now that pubs, clubs and restaurants have closed.

“The sectors we supply have all been asked to close as a result of COVID-19, so we are currently receiving no orders or income,” he said.

“Although we are trying to find a possible parallel market, this is not easy in these uncertain times and we will need to rely on Government support to get us through until the lockdown is lifted and business returns to some level of normality.

“The problem facing many businesses is that they have no idea when things will return to ‘normal’. We are hopeful that financial support from the Government will apply to us, though this hasn’t been 100% clear to date.

“It’s also hard to plan when we have no idea what will happen at the end of this initial three-month period and if the crisis is still hugely affecting the entertainment sector.”

“Some 86% confirmed they will need financial assistance, yet there is a great deal of uncertainty over the eligibility criteria for business loans and how quickly these can be accessed, if at all.

“Many businesses are also concerned about how paying furloughed staff will affect their cash flow in the short term before government support becomes available.

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“While the Government’s initial support package was widely welcomed by industry, there is a need to provide deeper advice and support for manufacturers to help them to adapt and to survive.”

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The Manufacturing Barometer, the largest survey of its type in England, shows that finding routes to new markets is one way for manufacturers to keep their business ticking over when their existing customer base is limited.

The 13% who said that their production levels have increased are supplying into the fields currently experiencing a higher than normal demand as a result of COVID-19, highlighting an opportunity for other manufacturers to support their supply chains at this difficult time.

Martin Coates, managing director of the Manufacturing Growth Programme, said: “One in five manufacturers have answered the Government’s urgent call for additional NHS equipment, but many of those questioned are still unsure whether or not their offer of help will be taken up.

“As the list of products necessary to help fight COVID-19 continues to grow, SMEs should be exploring this in further detail and to find other possible opportunities for their business.”

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