...and along comes the next challenge

Off course, it's is easy to just see the downsides, but are are always positives to be found. For example, according to the latest IHS Markit/CIPS UK manufacturing Purchasing Managers’ Index (PMI), the growth rate of UK manufacturing production accelerated to a seven-month high in February, aided by stronger domestic demand, fewer raw material shortages and an easing of global supply chain pressures.

The seasonally adjusted Index rose to a three-month high of 58.0 in February, up from 57.3 in January. The PMI has remained above the neutral 50.0 mark for 21 successive months. Faster growth of output, new orders and stocks of purchases are reported to be behind the February lift, offsetting the impact of slower job creation.  Higher new work intakes reflected stronger domestic demand, new customer wins, looser COVID restrictions and improved market conditions.

“Growth was boosted by stronger domestic demand and by firms catching up on delayed work as material shortages and supply chain disruptions started to dissipate. Consumer goods output in particular also benefitted from increased sales due to a further easing of COVID restrictions,” commented  Rob Dobson, Director at IHS Markit.

Overall, the Index found that the outlook remained positive, with almost 64% of survey respondents forecasting that production would increase over the coming 12 months, taking the overall degree of optimism to a six-month high.

However, as I’m sure CDA readers will have noticed it’s not all plain sailing at the moment, and the Index also found that new export business decreased for the fifth time in the past six months, amid reports of Brexit-related issues, ongoing pandemic restrictions in trading partners and the loss of business from long lead times.

This is borne out by the UK Export monitor from the Institute of Export & International Trade (IOE&IT) and Coriolis Technologies, which found that the largest businesses appear to have been the most severely affected. There are nearly 9% fewer of them exporting in February compared to a year ago. The equivalent reduction for medium-sized businesses is 3%, for small businesses almost 5% and for micro-businesses 6%, according to the findings.

Large exporters' revenues fell by around 12.4% in January compared to a 0.3% drop in medium-sized businesses’ revenues. Small companies were also severely affected with a decline of over 16% in revenues, which has directly impacted their budgets, but fortunately not their broader operations. This is a direct consequence of disruptions to supply chains in the early part of 2022, asserts the IOE&IT.

The beginning of 2022 saw imports from Europe subject to the same customs declarations as exports. There were 5% fewer exporters compared to 12 months ago, their number of employees has fallen back by nearly 5.5% and their revenues by almost 11% compared to a year ago.

And then, as if the knock-on effects of the pandemic and Brexit weren’t enough, Russia’s invasion of Ukraine has also resulted in increased uncertainty. As well as adding to already soaring energy prices, there are also concerns that the availability of commodities such as wheat, and metals including palladium, platinum, gold and aluminium will be impacted.

So as Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “There were certainly several positives for the UK’s manufacturing sector in February as 64% of manufacturing businesses remained optimistic. However, this success comes with a health warning as the Ukrainian crisis deepens and the potential for higher commodity prices, disruptions to supply and economic pain must be considered by businesses as they try to build resilience into their supply chains in the coming months.”