China lockdowns are exacerbating supply chain crisis, warn manufacturers
Covid outbreaks in China are worsening a supply chain crisis being endured by manufacturing companies, with an on-going lockdown in Shanghai particularly hitting exports of parts and components, according to a leading trade body.
Make UK senior economist Fhaheen Khan said: “What we’ve found from our own members, particularly not just the automotive sector, but other industries as well, such as electronics and mechanical engineering and equipment is that the access to components such as semiconductors and various metals has been extremely difficult despite prices increasing.”
Khan told GB News: “Our members have been telling us that the issue around the Russia Ukraine conflict although has been a problematic issue for them, such as the situation in China for example, the increasing level of lockdown and the resurgence of Covid and the shutting of ports in Shanghai, have made it significantly more difficult for industries in the UK to get access to much needed parts.
“That being said, demand is still very high, but there’s not much a lot of businesses can do if they can’t deliver on those orders when the parts are not coming in.”
He added demand for electric vehicles is strong, for example, but firms in the automotive sector are increasingly cash-strapped.
“Our own survey shows that business investment intentions to expand capacity were very high, but unfortunately those business have also been hit with increasing levels of energy costs, the increasing cost of raw materials and also rising costs of labour, which have made them increasingly cash strapped and making it more difficult to actually invest in that capacity,” said Khan.
“So there is as you say, a massive risk that we could fall behind, even despite being the first movers on the electric vehicle scene, but on a positive note, adoption of these types of vehicles is also quite strong.”Fhaheen Khan
“…the challenge is if it becomes more expensive to make those types of vehicles because of the access to parts, then that could slow down that development in the UK.”
He added: “What we’ve seen from the automotive sector and actually some other manufacturing industries is that even though there is demand there and actually intentions to hire workers are also very high.”
“The fact is that these businesses aren’t able to get the parts in to deliver on their orders.”
“We’ve already had reports or manufacturers were closing down specific segments of their business in order to save on energy costs in order to not waste resources.”
He said that, though demand for goods is high, there have been very recent reports from smaller companies of a reduced demand.
“The only thing that’s keeping the industry growing is the fact that there is demand for goods, but the risk is that how long is that demand is going to be sustained…smaller manufacturers are already indicating to us that they are seeing a slight drop off in orders.
“If that demand does come down, then there is a massive risk of the economy falling into more recessionary bounds in the near future,” Khan concluded.