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Travel uncertainty and consumer demand drives inward investment for UK manufacturers

05 July 2021

Following the publication of the latest UK Manufacturing PMI, Ginni Cooper, Partner at MHA, believes increased consumer spending and inward investment continues to propel demand but warns that lingering supply chain issues pose a significant threat to its longevity.

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Shutterstock image

“As the British economy further opens up and with full easing of restrictions on the horizon, UK manufacturers are continuing to benefit from pent up demand driven by increased consumer spending. 

“Hesitancy to commit to foreign travel, due to ongoing uncertainty over quarantine rules, has resulted in significant inward investment in the UK, in-turn spurring increased need for products domestically.

“Many manufacturers are in a fairly stable financial position, having continued to operate despite lockdown restrictions and having been closely monitoring their working capital. Because of this they are in a good position to consider investing in capital expenditure to boost production capacity, particularly in light of recent tax incentives such as the super deduction for new plant and machinery and a temporary increase in the first year allowance for special rate items. Some businesses have also been investing in technology which has improved efficiency and throughput, leading to an uptick in reviews of job roles and requirements. 

“However, while buoyed by increased demand, manufacturers are also being faced with the ugly prospect of having to absorb or pass on raised production costs to their customers because of raw material shortages and price increases. What’s more, supply chain issues and shortages – which were caused by prior factory shutdowns during the peak of lockdown – are now feeding through, and this is lengthening lead times and affecting manufacturers’ ability to meet the current high demand.”

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