3 in 4 Manufacturers Report Cashflow Difficulties

Around 74 per cent of UK manufacturing companies reported cashflow difficulties in the three months to May, according to the Confederation of British Industry (CBI).

Overall output across the sector is reported to have declined at the sharpest pace on record and since the CBI started tracking output figures in July 1975.

Some 84 per cent of manufacturers responding to recent surveys said they’d seen their domestic output take a turn for the worse this year, with the coronavirus crisis having heavily impacted both demand and the capacity of companies to operate as they normally would.

Disrupted supply chains has also been an issue for manufacturers, a slight majority (51 per cent) of which have been forced into implementing partial shutdowns of their operations in recent weeks.

As many as 59 per cent of respondents to the CBI’s latest surveys said they’d laid off some of their staff on a temporary basis in the three months to May, while 9 per cent said their layoffs were likely to be permanent.

Collectively, manufacturers expect output to fall again during the next three-month period but at a slower pace.

Total orders across the sector fell to their weakest levels since October 1981 and orders for exports haven’t been as weak as they currently are since October 1998, according to the latest data.

“These results show that manufacturers are still grappling with the impact of the pandemic,” said Anna Leach, chief economist at the CBI.

“Production levels have fallen even more sharply as firms experience collapsing demand and supply chain disruption, leading some to temporarily shut down their factories. The sector is bracing for what will be a challenging period.” 

Ms Leach went on to say that she hopes the government will continue to show flexibility in terms of the economic support it provides to companies like those in the manufacturing sector who’ve been badly hit by coronavirus.

By doing so the government will help to ensure “that the manufacturing sector can exit the lockdown with as little permanent damage as possible,” she said.