South East: Hard-hit manufacturers call for support

South East manufacturers are calling on the Government to provide immediate support for the sector in any emergency Budget as the full impact of the Covid 19 crisis hits the sector hard, according to the latest Make UK/BDO Q2 Manufacturing Outlook survey.

Make UK has already called on the Government to step in with direct support for key strategic sectors of manufacturing, as well as set up a National Skills Task Force. However, given the extent of the damage to manufacturing and its long supply chains, it now wants the Government to go further to provide immediate respite to company cashflow without which it fears the prospect of significant redundancies.

In the last few years the South East and London have been the best performing UK regions for manufacturing. However, according to the survey, output and order levels reached balances of -31% and -23% respectively, with UK and export orders both hit hard. However, the levels are not as severe as those experienced in other UK regions, suggesting the significant presence in the region of sectors such as electronics, which are benefitting from moves to digital technologies and automation, may have mitigated the impact domestically in the short term. This may also help explain why, compared to severe cutbacks elsewhere in the UK, investment intentions are only just negative at -3%

Despite the Government support schemes such as the Job Retention Scheme, the South East and London are not immune to job losses due to the fall in demand, although the employment balance at -17% is not as bad as the national figure.

As a result of the impact Make UK is forecasting that manufacturing will contract by almost 10% this year (9.4%) before recovering some of this with growth of +6.2% in 2021. It is forecasting the economy overall to contract by 7.8% this year before recovering most of this next year with growth of 7.2%.

Make UK region director for the South East Region, Jim Davison, said: “There is no disguising the fact these figures make for awful reading with the impact on jobs and livelihoods across the region. Industry and Government must now leave no stone unturned to retain as many key skills as possible within the sector to ensure it is in a position to effectively recover when growth eventually returns, which at some point it will.”

Richard Willis, head of manufacturing at BDO, said: “With output plunging and order books shrinking, many manufacturers in the region have had to ditch their investment plans and rethink their priorities. While the short-term support packages offered to date have provided a lifeline, it’s becoming increasingly clear that the Government needs to develop a comprehensive strategy to provide long term stability for the manufacturing sector. This could include direct support for some of the country's largest manufacturers that so many small and mid-sized suppliers rely on, in addition to new incentives to encourage investment in digital transformation and productivity.

“With COVID-19 causing instability in global supply chains and uncertainty surrounding our future trading relationships, the UK will become more reliant than ever on its manufacturing sector. Now is the time for the Government to step up and show its support.”