Global supply chain crisis slows down UK’s manufacturing output growth

11/03/2021 / By Arsenio Toledo

Disruptions in the global supply chain have slowed down manufacturing output in the United Kingdom. This drastic loss in momentum is threatening the country’s post-Wuhan coronavirus (COVID-19) lockdown economic recovery.

The main factors affecting manufacturing output are the shortages in both supplies and labor. Market information company IHS Markit said that many companies across the U.K. are being affected by a record rise in costs.

According to a recent survey conducted by the company, respondents cited rising costs in fuel, transportation and energy as some of the main reasons for the slowdown in manufacturing output.

Shortages and delays in the delivery of essential items are also affecting outputs. About 64 percent of manufacturers in the U.K. reported worsening supplier delivery times in October, compared to just one percent of manufacturers who saw an improvement in delivery times.

Market indexes are already showing the effects of lower manufacturing output in the U.K. According to the IHS Markit/CIPS Purchasing Managers’ Index (PMI), an index that shows the direction of economic trends in the manufacturing sector, manufacturing production only increased marginally and was at its slowest pace in eight months.

According to the index, the U.K.’s PMI for October is 58.8, slightly up from 57.1 in September. This is the first time the index has risen within five months, but the growth is still drastically slow.

Output growth at factories is close to stagnating, according to the U.K. Manufacturing Output Index. The index fell to 50.6, the weakest reading since February earlier this year. If the index falls below 50, that means the manufacturing output has stagnated.

The availability of clients who want to purchase manufactured goods is affecting overall output. New export business has fallen for the second month in a row. Many companies are reporting that many of their overseas clients are canceling or postponing orders due to the longer lead times caused by freight capacity issues, port congestion and other delays.

Car manufacturing in the UK drops to lowest level in 40 years

The slowdown in manufacturing hit the U.K.’s automobile production sector the worst. Car production in the country fell by 41.5 percent in September, representing the third consecutive month of decline in the industry.

This is the worst September in the history of the country’s automobile manufacturing industry since 1982.

The data is according to the Society of Motor Manufacturers and Traders (SMMT), a nonprofit trade association representing the U.K.’s motor industry. In September, the country manufactured just 67,169 cars, a drop of 41.5 percent from the previous month.

SMMT has blamed the drop in output at least partially on the global shortage in semiconductors. (Related: Microchip shortage affects production of new vehicles, leads to higher car prices.)

Production for both the domestic and export markets fell by 47.4 percent and 39.6 percent, respectively, with 52,872 cars shipped overseas. The SMMT said the drop in exports represents about a one-third decline in the total number of cars the U.K. sends to the European Union, the United States, Turkey and Australia.

The only part of the automobile industry that saw continued growth was the electrified sector. The SMMT’s figures show that the production of pure-electric, hybrid and plug-in hybrid vehicles broke records again in September. Electric vehicles now represent close to a third of all vehicles made in the U.K.

In its latest member survey, the SMMT found that 83 percent of automobile firms in the country have been negatively affected by the global supply chain crisis. This has resulted in reduced orders, increases in costs, delays in essential parts and disruption to regular operations.

The supply chain crisis has cost the sector 2.4 billion pounds ($3.276 billion) to date in additional costs. More than half of SMMT survey respondents do not believe supply constraints will be resolved until the third quarter of 2022.

“The substantial decline in U.K. car output in September continues the worrying trend we have seen over the past three months. The industry is continuing to battle the effects of the pandemic with the shortage of semiconductors stalling production,” said SMMT Chief Executive Mike Hawes.

“While there was welcome news in the government budget, it missed the opportunity to offer meaningful short-term support given COVID-related supply constraints and rising energy bills. This is disappointing given the sector’s importance and its ability to create well-paid jobs across the regions and the revenues it generates, notably from exports.”

Learn more about how the global supply chain crisis is affecting the economic output of countries like the United Kingdom at MarketCrash.news.

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