The latest monthly CIPS manufacturing PMI today reports an above neutral measure in June at 50.1. This marks a welcome return to positive sentiment. It also adds credence to short term opportunities to bolster and strengthen the prospects of the manufacturing sector, and those whose supply chains rely on it, according to leading audit, tax and consulting firm RSM. Among those opportunities are the opening-up of overseas travel corridors and reshoring to streamline business efficiency measures.
Mike Thornton, partner and head of manufacturing at RSM, comments: ‘Relaxing overseas travel corridors, whilst commonly seen as good news for holidaymakers, will also be seen commercially as a chance to ramp up import/export supply chains with new and existing customers. Many manufacturers will welcome the governments loosening of rules relating to travel corridors.
‘Reshoring has also been a trend within UK manufacturing in recent years, with improved quality and speed of delivery being two critical benefits. In light of Coronavirus, many more businesses are now looking to shorten supply chains and to improve resilience – often looking at multiple suppliers and UK-based options that might have been discounted in the past. As sentiment continues to improve, businesses will feel emboldened to accelerate reshoring strategies.’
CIPS PMI statistics:
‘Whilst the survey results are welcome, the longer-term outlook is still bleak. 2020 is clearly a write-off in economic terms, but only time will tell if 2021 will see a strong rebound and, perhaps more importantly, whether the sector will still have sufficient capacity to capitalise on all of the opportunities that may present themselves.
‘This is however a welcome return compared to the record lows seen in April and May. Manufacturers undoubtedly commenced their return to work in June, and hopefully this will continue apace through July as further government measures are eased. Economic freefall has ended. The recovery phase is underway.
‘Many manufacturers have reported that they are now able to operate effectively within social distancing guidelines. Many sectors served by manufacturers have seen some normality return to their demand, although as the survey highlights that the backlog of orders, and new order intake, is still weak.
‘Over the next quarter the financial lifeline of CJRS will gradually be removed and there is real concern for those sectors who supply non-essential ‘big-ticket’ items. Consumer behaviour will be critical for sectors such as automotive and there is a real risk that demand recovery will be slow in the face of widespread redundancies.’