A Perfect Storm: A Manufacturing Pandemic

It is becoming a well-used phrase, but as we come out the other side of the pandemic, businesses large and small are being buffeted by the outlying winds of a "perfect storm”. 

Numerous UK businesses took advantage of a number of government schemes designed to help them through the pandemic. Bounce Back Loans, CBILS, BBILS, and many others, have added billions to UK pls’s balance sheet. Of course, these loans must be paid back. The support provided by the government was predicted on very low interest rates, however, all support measures do not have fixed interest rates – they are variable. This means that if the Bank of England interest rate increases, so do the repayment schedules. 

Due to the pandemic, and other issues, things that we took for granted have changed significantly. UK manufacturing has been progressively hollowed out by governments of all political hues, therefore companies have off-shored, predominantly to Asia, for their consumer and business-to-business products. The supply chains supporting this business model have been developed and honed into a very slick, low-cost operation resulting in these products being readily available. 

As our economies recover from the pandemic, the global demand for sea-freighted product has escalated to the extent that more than 99% of the world’s fleet of container vessels are in operation or under repair; meaning there is no spare capacity. Therefore, costs to customers have increased by thousands. 

Here at Clevtec, we must compete with imports brought in by our competitors from Asia, where most fasteners used in all sorts of manufacturing in the UK and worldwide come from. In addition to cost increases, the actual time from shipment to arrival has increased significantly and has been exacerbated in recent months due to the problems in the Suez Canal. 

As we started to unlock across the world, steel manufacturing plants have not been able to keep up with the demand, and costs of raw materials for steelmaking have also increased massively. The result is steel shortages worldwide, which means prices go up – and they have at an unprecedented rate. 

Broken supply chains are going to have to make companies and governments think very carefully about the strategic position of manufacturing in the UK and its value, as opposed to its cost. When the full effect of inflationary pressures start hitting businesses, which are already hobbled by the loans they have taken out in order to survive the pandemic, they will be faced with increasing costs of financing existing loans and the new impossibility of getting new ones. 

The UK government’s decision to remove the trade credit insurance safety at the end of June also further compromises businesses abilities to fight back against the issues we are facing in the manufacturing industry.

If you would like to read more about how the pandemic is still affecting a range of sectors within the manufacturing industry, inclusive of automotive and petrochemical, please take a read through our sister company’s blog, found here. 

If you would like to find out more about how Clevtec could help your business and your upcoming projects, please contact us today by calling us on 0121 378 5960 today. Alternatively, you can email us at sales@clevtec.com.