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UK Manufacturing Sector Witnessing a Downturn

Increasing material and labour shortages, supply chain delays, and a slowdown in new orders hinders the UK manufacturing sector

The manufacturing purchasing managers' index (PMI) for the United Kingdom in September 2021 was 57.1, down 3.2 per cent from 60.3 in August. Materials and labour shortages, supply chain delays, and the stalling of new orders were among the issues that hindered the manufacturing sector. Upturns at medium and large-scale producers were offset by a continued downturn among small firms.

While demand in the UK and elsewhere has bounced back quickly as economies reopened, auto manufacturers have struggled to increase production due to disruptions of the pandemic.

This was mainly caused by a worldwide shortage of computer chips utilised in everything from entertainment systems to windscreen wipers and electric car batteries. Electrified vehicles, like the Mini Electric manufactured at Plant Oxford, now account for more than one in every four new models made in the UK, as the shift to more environmentally friendly driving intensifies.

Maddie Walker, Accenture's Industry X chief in the UK, shared her comments with the Guardian.

"While UK manufacturing output has slowed for the fourth consecutive month, it's not yet triggering alarm bells with manufacturers showing healthy optimism to meet orders. We expect a slowdown to continue as manufacturers see no respite from supply chain gridlocks, restricted port capacity and workforce shortages."

Sales of new vehicles fell in September – typically a strong month for the industry – due to a worldwide semiconductor shortage, according to the latest statistics from the Society of Motor Manufacturers and Traders (SMMT). Per month, registrations decreased by almost 35% year over year to 215,312. It was the weakest September rate since 1998. 

Auto manufacturers and suppliers are fighting to keep production lines running, with limitations likely to last well into 2022, if not longer. Because of the continuing pressure on supply chains, production growth has been significantly hampered. With demand outstripping supply, the inevitable outcome has been increased prices, eventually damaging consumers' wallets.

Economists consider that the PMI constitutes a solid predictor of industrial output. The manufacturing industry is feeling the pressure of an influx of supply chain bottlenecks and delays during any stage, from raw material procurement to component shortages and delivery interruptions.

Another issue that needs to be improved is upskilling the existing employees to match the new industry requirements. Manufacturers, particularly smaller firms with less market power, will be continuously weighed down by these challenges in the coming years.

If you are operating in this sector, now is the time to reconsider your organisational and operational structures. If you do not have a strategic plan that will allow your business to bounce back, it may be time to consider selling.



Megan Kelly

About the author

Megan is the Content Manager for Dynamis and writes for BusinessesForSale.com, the world's biggest marketplace for businesses for sale.

@Be_theBoss

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