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Nations around the globe are dealing with more than their fair share of supply chain challenges and interruptions right now, and the United Kingdom is no exception. Comprising England, Scotland, Wales and Northern Ireland, the U.K. is the world’s sixth-largest economy and was responsible for $2.83 trillion in gross domestic product (GDP) in 2019.
According to the Chartered Institute of Procurement and Supply (CIPS), rising supply chain constraints in the U.K. resulted in slower production growth and higher raw material costs in August. It says U.K. manufacturers faced rising constraints caused by supply chain issues during the month, with shortages of inputs and delivery delays disrupting production schedules, causing slower output growth and “marked increases” in input prices.
“As economies emerge from pandemic lockdowns, every corner of the globe is dealing with supply-chain bottlenecks. But almost nowhere are the problems as severe as those in the U.K.,” Sophie Mellor writes in “No McDonald’s milkshakes, no chicken, no gas: Why the U.K.’s supply-chain woes are so acute.”
“There, the general supply-chain hiccups seen around the world have been exacerbated by a lack of workers,” Mellor continues, “as post-Brexit employment regulations have forced many immigrants to return home.”
Solid Gains Despite the Struggles
According to CIPS, the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to a five-month low of 60.3, a tick below July’s 60.4 but above the long-run average of 51.9. “The PMI has signaled an improvement in operating performance in each of the past 15 months,” CIPS points out in its report.
“Companies nonetheless still achieved solid gains in output, new orders and employment,” CIPS added. It says the outlook for the U.K. manufacturing sector also remained bright in August, with almost 66% of companies surveyed indicating that they expect output to rise over the coming year (compared to the 4% that forecasted a decline).
“Confidence rose to a three-month high, reflecting expectations of continued economic revival, stronger global demand, investment plans and hopes that current supply issues would either lessen or even be fully resolved,” CIPS added, noting that employment rose for the eighth month in a row in August.
“Staffing levels were raised to increase capacity, meet rising demand requirements and start addressing backlogs of incomplete work,” it said. “However, there were also reports from some manufacturers of both labor and skills shortages.”
It’s a Carbon Copy
CIPS’ Duncan Brock said that August’s results were nearly a “carbon copy” of the previous month, where recovery for manufacturers continued, but there were signs of stagnation and the rise in overall activity slipped back to the weakest for half a year. “Businesses were thwarted by brittle supply chains struggling with shortages, port and transportation difficulties as delivery times stretched not to days or weeks, but months for some goods,” Brock added.
Other key findings from CIPS’ latest survey include:
- Average supplier lead times lengthened to the second greatest extent in the survey history during August 2021.
- The only time when delivery delays have been more pronounced was in April 2020, during the first COVID-19 lockdown.
- Input shortages, shipping delays, a lack of port capacity, transportation issues, Brexit and shortages of logistic industry staff all contributed to delivery delays.
- Manufacturers were able to pass on a part of the increase in costs to clients during August.
- Average selling prices also rose at one of the quickest rates on record.
“The sector is still optimistic about business opportunities in the next 12 months,” Brock concluded, “but there are significant difficulties ahead as a lack of labor and skills, coupled with escalating price inflation on even basic materials dampens prospects for manufacturing for the rest of the year.”
