2020 ends on a positive of sorts
02 December 2020
One way or another 2020 is a year that none of us is going to forget in a hurry. For the manufacturing sector, while Brexit dominated the first couple of months, it was soon to be overshadowed by COVID-19. Furlough, lockdown and social distancing became part of the vernacular and businesses tried, with varying degrees of success, to adjust to the ‘new normal’.
While many companies shone through with their ability to be agile, for many the conditions proved simply too difficult and are sadly no longer trading. It’s not all bad news though – as I write, approval has been granted for the Pfizer/BioNTech Covid vaccine to begin rollout next week, bringing the promise of something that, dare I say it, feels like it could represent the beginning of the end of the COVID crisis.
And, although the consumer goods industry appears to still be in the doldrums, according to the latest Markit/CIPS Purchasing Managers’ Index, growth in the manufacturing sector improved throughout November. Rates of growth in output and new business accelerated and the downturn in employment slowed. The upcoming end to the Brexit transition period meanwhile led to rising levels of input purchasing, stockpiling of raw materials and stronger gains in new export business as EU-based clients brought forward orders.
The Index tracked a marked divergence between different sectors within manufacturing. The intermediate and investment goods industries both registered robust and accelerated growth of output. In contrast, the downturn in the consumer goods sector continued, with back-to-back decreases in both production and new business.
The overall volume of incoming new business rose during November, albeit to a slightly lesser extent than the prior survey month. Manufacturers saw higher inflows of new work from overseas, in part boosted by EU clients bringing forward purchases before the Brexit transition period ends. There were also reports of higher intakes from Asia and the US.
The upcoming end to the Brexit transition period also affected the trends in purchasing, stocks and supplier lead times. Input buying volumes increased to the greatest extent since March 2019, mainly to achieve the steepest growth in stocks of purchases for over a year.
Higher levels of input buying also increased the pressure on already strained supply-chains, leading to raw material shortages and a marked deterioration in vendor performance. Longer supplier lead times were also linked to the ongoing effect of the pandemic, tighter restrictions (including renewed lockdowns), transport disruptions and shipping delays.
Manufacturing job losses were recorded for the tenth consecutive month in November. Reductions to staff headcounts were attributed to redundancies, cost reduction initiatives, staff restructuring, natural wastage and the ongoing impact of the COVID-19 pandemic. This was despite business optimism about the year ahead rising to a six-year high. Input cost inflation accelerated to a two-year high in November. Companies responded by raising their average selling prices to the greatest extent in the year-so-far.
Of course, we’re still waiting to hear what form the Brexit deal will take, if indeed there is a Brexit deal, so any data can only really be viewed as a snapshot, rather than indicative of any particular trend. With this in mind, let’s hope that 2021 ends up being notable for stability - although I for one am not holding my breath!