How has coronavirus affected manufacturing?

Manufacturing Update: How has the coronavirus pandemic affected the manufacturing sector?

Introduction

In this article, we will be covering how the coronavirus pandemic has affected the manufacturing sector. We will be using data from the Make UK’s Manufacturing Outlook Q2 to discuss how coronavirus has affected production, capacity and staffing in this sector.

Production and Capacity

Statistics from the Make UK’s Manufacturing Outlook 2020 Q2 suggests that the Coronavirus pandemic has shown similar falls in orders and output to the Global Financial Crisis in 2008. The most notable and perhaps the most worrying statistics are:

• 8% of manufacturers reported a decrease in sales
• 9% of manufacturers reported a decrease in orders
• 5% of manufacturers reported a decline in orders of between 26% and 50%

Furthermore, the latest statistics suggest that orders are not yet returning for manufacturers. This indicates that recovery for the manufacturing sector might not recover as quickly as first thought.

The latest figures show that 97.8% of manufacturers are continuing to operate through the coronavirus pandemic however most are not operating at their full productive potential. 16.4% of manufacturing firms are operating at full capacity (according to Make UK’s survey). This demonstrates that very few manufacturers are closing or looking at insolvency. Therefore, when demand rises again it will be much easier for the UK’s manufacturing sector to increase capacity.

Manufacturing Staff

What does this reduced operating capacity mean for the staff of manufacturing firms? Will there be redundancies? It is difficult to say as the impact of redundancies is yet to be seen, due to the furlough scheme subsidising payroll costs currently. In Q2 the Make UK’s Manufacturing Monitor reported that:

• 3% of manufacturers didn’t furlough any staff.
• Just over a quarter of manufacturers (26.4%) furloughed between 26% and 50% of their staff.

Make UK’s Manufacturing Monitor asked manufacturers about their redundancy plans for the next 6 months. On average 40.6% of manufacturers are planning on making some redundancies over the next 6 months. Jobs in the transport sector being most at risk with 78% of those firms planning redundancies in the next 6 months. With jobs in basic metals being at the least risk with 20% of firms planning redundancies in the next six months.

Unfortunately, this does mean that a reduced operating capacity is going to result in quite a high level of redundancies with at least 40% of manufacturing firms making staff redundant. Plus, a further 30.5% of firms saying that they are considering redundancies over the next 6 months.

How can we help?

At Hawsons we have a dedicated team of manufacturing accountants at our office in Sheffield, Doncaster, and Northampton. Our specialist team offers a wide range of services that are tailored to meet your individual needs. Our understanding of the issues faced by the manufacturing and engineering businesses means that we can proactively seek out ways for you to maximise your profitability and minimise your tax liabilities.

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