Businesses anticipate speedy recovery for manufacturing

A new study has found that more than nine-in-ten manufacturers expect their business to fully recover within a year of a Covid-19 vaccine becoming available. According to the survey from BDO, the remainder expect they will recover within the following three years.

The UK manufacturing scene has faced a multitude of headwinds over the last few years. The continued uncertainty around Brexit and the nation’s international trade policies have hit demand, while the sector has also sought to respond to digital disruption. In 2020, the Covid-19 pandemic exacerbated the situation, shunting the global economy into the deepest recession since the Second World War.

However, according to a new survey of manufacturers by professional services firm BDO, 95% of manufacturers surveyed predicted that their business would fully recover within a year of a vaccine for Covid-19 being available. Surveying 111 mid-market manufacturers, the company also found that the remainder felt their firm would be able to recover in the next three years. So positive was the response to the possibility of an end to the pandemic that 47% believed that news of a vaccine would prompt them to change their business plans.

However, Tom Lawton, National Head of Manufacturing, BDO, cautioned that while the news that vaccine trials had proved effective had “given a much needed boost to the manufacturing sector”, it is very much “not out of the woods yet.” Explaining that “things are likely to get worse before they get better,” he explained that the conclusion of Brexit would have a massive impact going forward.

Lawton explained, “The transition into the new trading arrangements with the EU at the end of this year, and the ending of the furlough scheme in the early part of next year will both prove challenging and will test the resilience of many manufacturers. The sobering comments made by the Chancellor in the recent spending review also indicate the general economic challenges to be faced by UK manufacturing over at least the short to medium term.

In preparation for Brexit, three-quarters of respondents told BDO that they had a strategy in place for the transition. As a result, 53% reported that despite the situation coming to a head, they felt optimistic about the UK’s economic recovery compared to three months ago. With this optimism, 39% of UK manufacturers plan to invest in technology to increase businesses efficiency in the next six months – even while they are cautious about the challenges for 2021, such as paying back business loans (19%), further lockdown (17%), and that the tiered lockdown system will widen regional economic divide (93%).

Lawton concluded that, all in all, “It is very encouraging to see so many manufacturers looking to the future and investing in new technology to improve productivity and competitiveness. This will be vital for long term sustainability and growth.