Manufacturing recovery could be derailed by supply chain issues, caused in large part by labour shortages, a leading accountancy firm has warned following the release of the latest UK Manufacturing PMI yesterday (September 1).
Chris Barlow, partner at MHA, said: “Demand is encouragingly high within the manufacturing sector but there is major concern with supply chains.
“We are hearing stories of many unfulfilled orders as shortages of materials and workers hit the whole economy. A scarcity of freight and the Government’s refusal to allow drivers to be termed ‘skilled workers’ to facilitate overseas recruitment is responsible for many of the logistical difficulties.
“In addition, the combination of global semi-conductor shortages, the pingdemic, tax changes and summer shutdowns is depressing output.”
SHORTAGES
Chris says that, if this pressure is not eased, supply chain shortages will lead to inflation, which will have further negative consequences for the whole economy and for manufacturing, the sector which has been leading the way in terms of recovery.
“Manufacturers need to review the resilience of their supply chains as a priority and if they haven’t already started they need to begin now, as this can be a slow process,” he said.
“The worsening situation requires short-term assistance from the Government far beyond their recommendations for manufacturers to shore up supply chains with workers due to come off the furlough scheme when this closes at the end of September. It’s highly unlikely these workers have the skills required or can be trained in the requisite timescale.
“This is part of the perennial skills shortage that has remained the main problem within manufacturing for many years. While this has proven to be a hard problem to solve, part of the answer could be increased tax incentives for companies to really invest in the retraining of workers coming off furlough at the end of September to address the stark supply chain issues and enable manufacturers to meet future demand.”
