As more and more people are vaccinated and as coronavirus looks to be better controlled, people are starting to take stock of what effect the pandemic has had on the economy. One important part of the British economy is the manufacturing industry, with an 18% share of GDP in 2020. This article largely draws upon research undertaken by the UK’s Economic and Social Research Council to try and explain the main ways this sector of the economy has been affected.
According to government statistics on output by sector, the manufacturing industry suffered roughly in line with the economy as a whole during the pandemic. Compared to February 2020, output in manufacturing dropped by around 27% in April and May 2020. Since then, the same statistics report that the sector has steadily recovered. As of July 2021, manufacturing had recovered output levels to only 2.5% lower than pre-pandemic levels.
While these figures present a picture of recovery for UK manufacturing, the real situation is quite complicated, with major changes have taken place. On top of this, many firms have suffered enormously and many have been heavily stretched or have had to close.
Furthermore, the situation for the manufacturing industry has been further complicated by the effects of Brexit negotiations and other political events.
The major changes which have been reported in the manufacturing sector, as a result of coronavirus, are as follows.
One of the major problems arising from coronavirus, particularly during the early stages, was that supply chains were severely disrupted. Some manufacturers, notably those in the automotive industry, were forced to halt operations as supplies could not be sourced.
However, while there has been operational disruption, there have been some positives that have arisen from the disruption to supply chains. While the sourcing of materials presented a problem, some new outlets developed for manufacturing after goods that were previously sourced from abroad could no longer be. One example is PPE. Where buyers of PPE had previously sourced it from abroad, they turned to UK manufacturers instead. As well as UK PPE manufacturers finding new outlets and increasing production, other businesses diversified to manufacture PPE in order to make up the shortfall. The same situation has been reported for various other goods.
The coronavirus pandemic forced many manufacturing companies to become highly innovative in order to survive. In interviews conducted during the UK Economic and Social Research Council’s investigation, it was found that every company interviewed had been forced to innovate heavily in order to stay in business.
Some businesses had had to find innovative ways in which to reduce costs and increase efficiency in order to survive. Others had to innovate more extensively by finding new markets, new products, and new partnerships. Others had to completely restructure their business model or change their approach entirely.
This has been disruptive and the outcome has not always been entirely successful. However, for many, the pressure to innovate has brought about a positive change in that the process of evolution has been speeded up.
Changes to work patterns, such as working from home and organising operations around social distancing were a major upheaval at the time they were introduced. While home working may be the only of those changes that people would like to keep, many people reported that the general shift in attitude towards the health, wellbeing, and personal circumstances of work colleagues may be a change that will stay. Some businesses have reported that elements of the changes to work patterns brought about by coronavirus are likely to be permanent
Some businesses have diversified into new areas in order to make the most of the changing circumstances. Where coronavirus has presented problems, manufacturers have raced to solve those problems.
One largely positive result of the pandemic is the increased uptake of digital technology. This was also something that many people had been calling for before the pandemic started. Digital technologies enhance efficiency and the pressure to improve, many believe, will make British manufacturing more competitive in the longer term. For many manufacturing companies, the uptake of digital technology will ultimately lead to increases in profitability.
The furlough scheme did help the manufacturing industry to retain far more personnel than was expected at the start of the pandemic. However, there was still an effect on personnel in the manufacturing industry. One notable problem was that, while many existing jobs have been kept, many upcoming apprenticeships and other entry schemes have been canceled.
As a result, the normal need for a supply of young entrants to the industry is unlikely to be met for some time. On top of this, young entrants are exactly what is needed at a time of increased digital uptake and other forms of innovation.
There are various examples of goods that were previously generally imported from abroad but are now produced in the UK instead. Reshoring has taken place on a large scale as a result of coronavirus, as government and industry look to be less reliant on overseas suppliers. Many people see this trend as an opportunity for UK manufacturing.
Here is how some of the major sub-sectors of manufacturing have reported being affected by the pandemic.
Generally speaking, there was a divide between those who produced for the hospitality sector and those who produced for supermarkets, shops, and online. As is expected, those who produced for the hospitality sector were hit quite hard with lengthy periods of serious disruption. On the other hand, those who produced for supermarkets, shops, and online experienced increased demand.
In some cases, producers who saw a fall in demand were able to diversify by offering online services. A good example of this is small-scale market stall-style food businesses that were able to open online shops in order to find a new market.
The oil and gas industry was heavily hit by the drop in car and air travel. On top of this, social distancing rules complicated offshore work and hampered other operations. 4000 jobs were lost in offshore operations early on in the pandemic and the ongoing drop in demand caused issues in the sub-sector supply chain and with larger businesses.
As most people are aware, the aerospace industry was hit heavily by the pandemic and is still suffering today. One of the major concerns from within the industry has been the loss of skilled workers. Where companies have not been able to keep their employees, their exit has left skills gaps that may be hard to fill in the future.
A number of airlines have gone bankrupt across the world, including Flybe in the UK. On top of this aircraft manufacturers, maintenance and other businesses in the aerospace industry have suffered a great deal.
The automotive industry was heavily hit, however, many expected the consequences to be worse than they were. One notable point came in late March and early April 2020 when all the main manufacturing plants in the UK were closed because of supply chain issues. On top of supply problems, manufacturing processes became complicated and car showrooms were closed, causing a loss of sales. In spite of this, the sector has not suffered as badly as many expected.
While some businesses within the life sciences sub-sector of manufacturing suffered heavily as a result of the pandemic, this was one area where some businesses were able to benefit. Businesses related to the treatment and prevention of coronavirus were, in many cases, able to take on huge amounts of business and perform successfully.