Report Reveals Manufacturing Losing £540m A Day Due To Fall In Consumer Demand

A new economic report into the regional impact of the coronavirus lockdown has shown that UK manufacturing is the sector hardest hit, largely due to falling consumer demand.

According to UK Powerhouse, a report by Irwin Mitchell and the Centre for Economic and Business Research (Cebr), UK manufacturing sector GVA* has fallen by 75% a day - a loss of £540m in absolute terms.

Manufacturing is exempt from the rules on non-essential travel and working, but the slump in demand, coupled with supply chain disruption has seen the sector bear the brunt of lockdown.

Certain subsectors such as food production, pharmaceuticals and soaps are still operating but that aside, UK manufacturing is almost completely shut down as a result of demand reductions.

Dorrien Peters, partner and Head of Irwin Mitchell’s Manufacturing group, said: “There is no denying the impact the lockdown has had on UK manufacturing. Falling consumer demand has had a profound impact and northern regions with manufacturing clusters have a big impact on the local economy and the nation as a whole.”

England accounts for 88% of all GVA losses, so the figures here are similar to the wider UK economy, with manufacturing losing £470m a day. Protected by the relatively high proportion of the economy devoted to forestry, agriculture and fishing, Scottish manufacturing is losing £34m a day, as the impact of Covid-19 has been felt more in construction, with 95% lost to the lockdown.

With 14% of Welsh GVA is attributed to manufacturing compared to 9% for the UK as a whole, Wales is losing £22m a day, thanks to its high concentration of manufacturing firms.

Northern Ireland has lost the highest proportion of GVA due to the Covid-19 lockdown of all the UK nations at 38%. Manufacturing here is down £13m a day, or 75% lost.

As the hub of financial and insurance services, London comes out best of all UK regions in terms of GVA lost and manufacturing is correspondingly the least affected, at £30m a day lost or 57%.

This is in contrast to the impact in the UK manufacturing heartlands, where the West Midlands is losing £81m a day or 89%; not surprising when manufacturing accounted for £90m of the £620m of GVA per day pre-Covid-19 and for approximately one third of the loss in GVA per day.

The report reveals the South East recorded the second worst figures, losing 81% or £75m a day.

Expert Opinion

“The South East figures may come as a surprise but the most prosperous region after London has a professional service economy to offset the worst effects. In contrast, the North East, with the smallest economy of all the UK regions has no such alternative to fall back on.

“While the current position is dark, there could be light at the end of the tunnel. From the supply of PPE and ventilators, to switching production from spirits to sanitiser, UK manufacturing has risen to the challenge of Covid-19. The lockdown has also shown just how much the sector means to the wider economy. If business responds by having more products manufactured in the UK as a means to safeguard supply chains, the sector may have a brighter post lockdown future.” Dorrien Peters - Partner

Methodology

To calculate the UK’s impact (and the regions), Cebr calculated the pre-COVID GVA per day. To assess the lockdown’s impact, it estimated demand and supply-side impacts for each of the sectors below – these impacts include elements such as ability to work remotely, proportion of workers off sick, actual demand for the products and supply-chain disruptions that the lockdown has caused. As such, each sector listed below has an estimate of the impact of the lockdown and is presented in absolute terms and a percentage loss.

* Gross value added