Manufacturing hardest hit by COVID-19 lockdown, says report – but hints at brighter future

06 May 2020

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UK Powerhouse report reveals UK manufacturing is losing £540m per day during the current coronavirus lockdown, due to falls in consumer demand – but hints at a brighter future post-lockdown, as manufacturers rise to the COVID-19 challenge & the value of the sector to the economy becomes clearer.

A new economic report into the regional impact of the coronavirus lockdown has shown that manufacturing is the sector hardest hit in the UK, largely due to falling consumer demand.

According to UK Powerhouse, a report by law firm, Irwin Mitchell and the Centre for Economic & Business Research (CEBR), one of the UK's leading economics consultancies, UK manufacturing sector GVA (gross value added) has fallen by 75% a day – a loss of £540m in absolute terms.

Manufacturing is exempt from the rules on non-essential travel and working, but the slump in demand, coupled with supply chain disruption, has seen the sector bear the brunt of lockdown.

Certain subsectors, such as food production, pharmaceuticals and soaps are still operating, but much of UK manufacturing is almost completely shut down as a result of demand reductions.

Impact of lockdown on select sub-sectors of the economy:


GVA loss per day, £m

GVA remaining, £m

% lost

% remaining

Agriculture

7.3

45.6

14%

86%

Manufacturing

539.8

180.2

75%

25%

Education

207.8

243.1

46%

54%

Sport Activities

40.6

4.5

90%

10%

Charity

11.9

22.2

35%

65%

Source: ONS, Labour Force Survey, BRES (Business Register & Employment Survey), CEBR analysis


Dorrien Peters, partner & Head of Irwin Mitchell’s Manufacturing Group, said: “There is no denying the impact the lockdown has had on UK manufacturing. Falling consumer demand has had a profound impact, and Northern regions with manufacturing clusters have a big impact on the local economy, and the nation as a whole.

England accounts for 88% of all GVA losses, so the figures here are similar to the wider UK economy, with manufacturing losing £470m a day. Protected by the relatively high proportion of the economy devoted to forestry, agriculture and fishing, Scottish manufacturing is losing £34m a day, as the impact of COVID-19 has been felt more in construction, with 95% lost to the lockdown.

With 14% of Welsh GVA attributed to manufacturing, compared to 9% for the UK as a whole, Wales is losing £22m a day, thanks to its high concentration of manufacturing firms.

Northern Ireland has lost the highest proportion of GVA due to the COVID-19 lockdown of all the UK nations at 38%. Manufacturing here is down £13m a day, or 75% lost.

As the hub of financial and insurance services, London comes out best of all UK regions in terms of GVA lost, and manufacturing is correspondingly the least affected, at £30m a day lost or 57%.

This is in contrast to the impact in the UK manufacturing heartlands, where the West Midlands is losing £81m a day or 89% – not surprising when manufacturing accounted for £90m of the £620m of GVA per day pre-COVID-19 and for approximately one third of the loss in GVA per day.

The report reveals the South East recorded the second worst figures, losing 81% or £75m a day.

Dorrien added: “The South East figures may come as a surprise, but the most prosperous region after London has a professional service economy to offset the worst effects. In contrast, the North East, with the smallest economy of all the UK regions has no such alternative to fall back on.

While the current position is dark, there could be light at the end of the tunnel. From the supply of PPE and ventilators, to switching production from spirits to sanitiser, UK manufacturing has risen to the challenge of COVID-19. The lockdown has also shown just how much the sector means to the wider economy. If business responds by having more products manufactured in the UK as a means to safeguard supply chains, the sector may have a brighter post-lockdown future.


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