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UK manufacturers call for stimulus package to save jobs

18 June, 2020

“To help get the UK economy and manufacturing back on its feet as we emerge from lockdown, it is vital that every part of Government puts its shoulder to wheel with a national recovery plan for the short and long term,” he adds. “The Chancellor can lead this charge with an immediate package of measures to provide the consumer and industry with the shot in the arm they need.”

The Make UK/BDO survey shows that all sectors suffered a severe drop in output, with those closely connected to the automotive, aerospace and construction sectors suffering particularly badly.

Make UK describes the levels reached by those sectors connected with investment in capital and automation as being “especially concerning” with machinery equipment recording –70%, electrical equipment –67% and electronics –54%. The organisation says that these sectors serve as a proxy for investment in new technologies across the wider economy. Just 11.7% of the companies surveyed said they were operating at full capacity.

The Make UK/BDO survey reveals that employment and investment levels of the lowest they have been since the economic crisis
Source: Make UK Manufacturing Outlook survey

Both employment and investment levels have been cut back significantly. The employment balance fell to –22%, indicating that many companies are already making redundancies. Without the job retention scheme, it is likely that the employment figures would have reached the worst levels in the survey’s history. The employment balance is forecast to accelerate further in the next three months to -36%.

Having appeared to turn a corner at the start of the year after the greater certainty provided by the election and leaving the EU, the picture for investment has gone into reverse falling to a balance of –26%. Make UK is now forecasting that manufacturing will contract by almost 10% this year (-9.4%) before clawing back some of this loss in 2021 (+6.2%).

“With output plunging and order books shrinking, many manufacturers have had to ditch their investment plans and rethink their priorities,” reports Tom Lawton, BDO’s head of manufacturing. “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 improvements.

“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,” Lawton adds. “Now is the time for the Government to step up and show its support.”

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