UK industry is calling for a national recovery plan, including a short-term stimulus, to boost investment and help save valuable jobs.
A survey shows manufacturing output has plunges to a record low as the peak of the pandemic takes its toll on the economy.
The Make UK/BDO Manufacturing Outlook Q2 survey comes on the back of the historic fall in GDP and shows the balance for output reached the lowest level in the thirty year history of the survey, surpassing the previous record lows seen during the worst of the financial crisis.
Looking forward, the survey shows the prospect for the next quarter and the rest of the year looks little better.
Both UK and export orders plunged and, while the furlough scheme appears to have mitigated the worst impact of immediate redundancies, evidence suggests that without government intervention to free up firms to invest again this has merely delayed large scale redundancies in addition to those already announced in the aerospace and automotive sectors.
Given the outlook for the rest of the year and into 2021, Make UK is calling on the government to work with business and other key stakeholders from across the UK on a national recovery plan.
In the short term this should begin with an immediate stimulus package beginning with an immediate business rates holiday for manufacturers similar to that granted to the retail sector earlier this year.
Make UK believes this would be the single most important measure the chancellor could introduce having the quickest impact for companies of all sizes and across all sectors.
This should be accompanied by other immediate measures including a national infrastructure Strategy with a commitment to immediate projects to help supply chains, a car scrappage scheme and incentives to invest in digital technology and skills.
Make UK also re-iterated its previous call for government help for recapitalisation to direct support at key sectors and companies, in particular to allow companies to access capital to service debt incurred during the lockdown.
Stephen Phipson, chief executive of Make UK, said: “These figures graphically illustrate the severity of the crisis facing manufacturers of all sizes and in all sectors right across the UK. As with all other crises, however, the sector will find a way to recover though there is no disguising the immediate months and perhaps years ahead will be some of the toughest industry has ever faced.
“To help get the UK economy and manufacturing back on its feet as we emerge from lockdown it is vital that every part of government puts its shoulder to wheel with a National Recovery Plan for the short and long term. The chancellor can lead this charge with an immediate package of measures to provide the consumer and industry with the shot in the arm they need.”
According to the survey, output reached a record low of -56%, while both UK and export orders fell to -52%, comparable to the levels seen during the worst of the financial crisis.
All sectors suffered a severe drop in output with those closely connected to the automotive, aerospace and construction sectors suffering very badly.
Especially concerning were the levels reached by those sectors connected with investment in capital and automation, machinery equipment -70%, electrical equipment -67% and electronics -54% all of whom serve as a proxy for investment in new technologies across the wider economy. Overall, just 11.7% of companies said they were operating at full capacity.
The survey of 309 companies was carried out between 5 and 26 May.
Make UK www.makeuk.org