• The future of the UK manufacturing sector: surviving in the new reality
Article:

The future of the UK manufacturing sector: surviving in the new reality

05 November 2020

Data analysis of the impact of COVID-19, actions for recovery and cash management

Many UK manufacturing companies have been impacted by COVID-19 and have implemented short-term actions to reduce costs as turnover has fallen. As the recovery to pre COVID-19 volumes is likely to be protracted for many manufacturing sub-sectors, medium to long-term actions are now being implemented to refocus businesses, preserve cash flow and improve balance sheet strength. Our support to UK manufacturing clients is considerable, through a diverse range of work we have a deep understanding of their needs and issues. To further this knowledge, we recently surveyed a number of UK manufacturing companies to understand what actions they have been taking for recovery.

The data analysis findings by Ryan Grant and Stephen Cooney summarises the finding of the survey. It identifies the percentage of manufacturing businesses that have been materially affected and the short-term actions they have implemented such as cost reduction and securing additional finance to mitigate the increased risks. It provides fascinating insight into the most popular medium to long-term actions and alarmingly how many small to medium sized businesses are concerned that they will run out of cash by the end of 2021. Where appropriate the survey data is broken down by company size and manufacturing sector.

As a result of difficulties management teams face, such as managing stakeholders expectations with having to deal with multiple events concurrently to keep businesses operating safely, the article concludes by offering some useful approaches we are currently employing to help our clients. 

"Over 80% of transport businesses surveyed, which includes the Civil Aviation and Automotive sub-sectors, have been materially impacted."


DOWNLOAD the analysis findings.

You may also be interested in an associated article featured in the Q3 Make UK / BDO Manufacturing outlook Report which considers what manufacturing sectors would be at risk of a significant number of businesses failing, based on historically low levels of sector profitability and recovery time to pre COVID-19 production volumes.

CONTACT

If you would like to discuss any of the findings in the article please contact Ryan Grant or Stephen Cooney.
 

 


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21 September 2020 

The uncertainty felt by many businesses in the UK caused by the impact of the pandemic is continuing with the loss of output, significant increase in balance sheet liabilities and increased debt burden. The Make UK/BDO Manufacturing Outlook Q3 2020 survey provides first hand evidence that many manufacturers are continuing to struggle and despite clawing back some lost ground compared to what was a cataclysmic Q2 for the sector, several indicators remain in negative territory. It now looks increasingly likely that COVID-19’s impact on the global economy will weigh heavily on business confidence and consumer spending well into 2021 and beyond, leaving many UK manufacturers exposed. Lost output and income could significantly increase balance sheet liabilities and debt burden. 

Navigating this new landscape will be a challenge and restructurings are likely to be common. This will not only affect jobs in individual companies; it will also affect companies within the interconnected supply chain and local economies. Most manufacturers responded well to the initial impact of COVID-19, focusing on minimising the immediate effects on business operations, reducing costs, preserving cash and implementing necessary measures to ensure employee safety. 

Many business-operating models designed originally to address a short-term downturn, will now not be adequate for the anticipated long-term recession. But with a ‘V shaped’ recovery and a quick return to pre-COVID volumes looking increasingly unlikely, it could be two to three years before demand recovers for some manufacturing sectors. There are also specific sectors that look more exposed to the crisis compared to others – with aerospace and perhaps automotive being the most notable examples now. For these businesses to survive in the medium to long-term, measures that are more fundamental may be required.

Using our Rethink framework, Stephen Cooney and Ryan Grant explore how the pandemic has affected the UK manufacturing industry, identifies which sub sectors are more at risk and what management teams can be doing in the short, medium and long term to survive. Implementing one or a combination of strategies will require a business transformation programme to be set up and it is likely that management teams will require additional support to define, plan and implement agreed actions for change. 

DOWNLOAD the previous report here

For distressed manufacturing businesses, the new restructuring provisions within the recently introduced Corporate Insolvency and Governance Act 2020 (‘CIGA’) are a welcome addition to the available restructuring tools, especially as these are debtor-led processes that allow a company to control its own restructuring process. 

Although COVID-19 has had a significant impact on the manufacturing sector, we would suggest that companies should respond positively to the challenges and use the pandemic as a catalyst for change and an opportunity to build resilience into their operations. Many of our clients have already embarked on this journey and are actively in the process of reshaping their businesses.

Contact

To discuss anything you have read in the article or to give you room to make the right strategic decisions for your business, please contact either Ryan Grant or Stephen Cooney.