BoE publishes its findings on the UK Manufacturing

The Bank of England has published its findings on the UK Manufacturing sector this week (mid-April to mid-May 2020).

Due to the impact of the coronavirus, manufacturing output is ‘significantly weaker’ than in Q2 2019, although there has been a modest improvement in recent weeks as more companies re-open following an easement of the Government’s lockdown measures.

A growing number of UK manufacturers are resuming production, albeit many are operating well below full capacity due to social distancing measures and a high proportion of workers remain on furlough leave or reduced hours.

Manufacturing contacts said they expected social distancing and weak demand to constrain output for several months. The most common central expectation among companies was that output would still be around a fifth below normal levels by the end of the year.

• The published chart shows that widespread shutdowns have caused manufacturing output to fall sharply

The aerospace, automotive, heavy engineering and oil and gas industries have been most severely affected by economic disruption caused by the pandemic, leading to redundancies.

Food producers have also been hit by loss of food service business and a drop in demand for pre-packaged food, which has been only partially offset by higher demand from supermarkets. It is estimated that it could take two to three years for food service demand to return to pre-pandemic levels. By contrast, producers of chemicals, technology and healthcare and personal protective equipment (PPE) have reported strong demand.

Supply chains were found to be generally stable, with only a few reports of shortages. For example: In the materials used in the production of PPE. However, some contacts were concerned that bottlenecks for other materials could emerge as output picks up and suppliers’ inventories run down.

Source: Bank of England