Fears grow as UK factories hit by worst supply chain shortages since mid-1970s | Supply chain crisis

UK manufacturers are grappling with their worst supply shortages since the mid-1970s, as fears grow in the industry about the economic fallout from rising costs and lack of key materials.

Almost two-thirds of companies polled in the Confederation of British Industry (CBI) snapshot warned that component shortages would affect factory output over the next three months.

It was the largest share since January 1975, a year when inflation peaked after the war amid severe economic turmoil in Britain and abroad, with NHS medics on strike and Glasgow garbage collectors organizing industrial action.

The latest survey of 263 manufacturers, conducted amid severe supply chain disruption caused by Covid and Brexit, also noted growing concern about staff shortages that are holding back industrial production over the years. next months.

As many as two in five companies worried about the lack of skilled labor to run factory production lines, the highest since July 1974, when Britain was still coming out of the three-day week a few months earlier.

A week before Rishi Sunak delivered his budget and expenditure review, the CBI warned companies were facing rising costs and growth in the manufacturing sector was under threat.

Amid slowing economic growth and fears that serious disruption could ruin Christmas, ministers this month recruited former Tesco chief executive Sir David Lewis to lead a new supply chain advisory group .

However, the CBI said bold action is needed in the budget to unlock short-term challenges in the economy.

“Manufacturers are using key levers, such as hiring new workers and planning additional investments in factories and machinery and training, to increase production,” said Anna Leach, group deputy chief economist pressure. “But with order and cost growth expected to increase over the next quarter, we’re not out of the woods yet.”

Firms reported that average cost growth in the three months leading up to October remained broadly in line with July levels, a period in which the prices facing firms rose at the fastest rate since 1980. .

The companies said rapid cost growth is expected to continue to fuel price pressures, with average domestic and export prices increasing at the fastest pace since 1980 and 2011 respectively. It comes after official figures showed ex-factory prices jumped to 6.7% in September, from 6% a month earlier, the highest level in a decade.

Overall, output in the manufacturing sector increased in the three months ending in October at a rate just as strong as in September. Production increased in 11 of 17 subsectors, with growth driven by the chemicals, aerospace and food, beverage and tobacco subsectors.

Despite concerns over supply shortages and rising prices, companies expect production growth to continue to increase in the coming months.

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With global energy costs soaring, the Bank of England has warned that UK inflation could peak above 4% this winter and remain at high levels through the summer.

Threadneedle Street is expected to raise interest rates to fight inflation above its 2% target rate, possibly as early as November. However, the government and the bank have said the rapid price growth is likely to be temporary and is expected to subside next year as the pandemic disruption wears off.

Tom Crotty, group director of chemical company INEOS and chairman of the CBI’s manufacturing board, said he was reassuring that growth in industrial production and new orders continued into the fall despite economic challenges.

“However, the last quarter was undoubtedly overshadowed by companies facing material or component shortages, struggling to fill roles and grappling with increased pressure on energy costs. It is essential that the government continues to work constructively with business to identify ways to alleviate this difficult situation, ”he added.

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About Natalee Broderick

Natalee Broderick

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