£23.6b unfinished goods trapped

Barclays Corporate Banking’s head of manufacturing, transport and logistics, Lee Collinson, explains how industry is working hard to release trapped work-in-progress

A new Barclays Corporate Banking report reveals goods valuing £23.6b are awaiting completion in UK manufacturers’ warehouses because of supply chain delays. The Chain Reaction study focuses on manufacturing businesses with over ten employees and looks at the impact of supply chain issues. Barclays’ research shows over 72 per cent of businesses are holding items in their warehouses awaiting completion because raw materials, ingredients or component parts have not been delivered. On average, this ‘unfinished business’ is worth over £1m to each company impacted.

Products in the steel/metals sector are most severely affected, with £9b worth of goods incomplete—equivalent to almost 19 per cent of the sub-sector’s annual turnover. A high value of plastic products (£2.6b) and electronics (£2b) are also awaiting completion.

The trends are reflective of supply chain disruption that has challenged the manufacturing sector since the pandemic and 59 per cent of firms say they are still facing supply issues. This has been exacerbated by the invasion of Ukraine and the aftermath of the UK’s exit from the EU. Customer relationships are now being impacted: 65 per cent of manufacturers say their customers are having to wait longer for products, with 15 per cent describing the hold-ups as ‘significant’. To offset rising costs such as energy and transportation, 55 per cent of manufacturers are planning price increases for their own products.

Industry is innovating to solve these challenges. Most commonly: 39 per cent of businesses are increasing their storage capacity; 33 per cent are near-shoring; and 32 per cent have friend-shored to work with suppliers in countries with a strong UK trading relationship. To spread their bets, 37 per cent of manufacturers have increased the number of suppliers they work with.

Such measures are leaving industry confident in the medium-term. Two thirds think supply chain challenges will improve over the next six months and 86 per cent are confident about growth next year.

The report also lays bare the threat that rising costs and supply chain disruption could pose long-term if circumstances do not improve. On average, UK manufacturers only expect to be able to sustain their operations for 15 months if current conditions continue.

Barclays Corporate Banking’s head of manufacturing, transport and logistics, Lee Collinson, said: “The British manufacturing sector has faced a perfect storm of challenges this year, with rising costs, the war in Ukraine, labour shortages and ongoing Covid lockdowns in China hitting supply chains hard. As a result, billions of pounds worth of goods are trapped in warehouses unfinished, and this may hit industry turnover in the early part of next year.

“However, manufacturing firms have done what they do best and engineered new solutions to limit the impact of the issues they face. As a result, many businesses will enter the new year with a degree of cautious optimism and confidence.”

Other findings include: some 64 per cent of manufacturers have faced rising costs because of the weak pound; trade barriers are a concern, particularly for electronics and automotive; and government interventions manufacturers would like to see are energy transformation and a more aggressive energy price cap.