Manufacturers in Northern Ireland have been hit particularly hard by the Covid-19 pandemic, with 81% of manufacturers confirming that they have put staff on furlough.
This week, Manufacturing NI have been surveying the sector to get a live understanding of the issues faced and actions taken in their business to deal with the current Covid crisis.
What is clear is that we are fighting not only a public health emergency but an economic emergency too.
The UK Government and the NI Executive have taken action to help protect firms and jobs, but this appears to be only delaying a major economic crash in the weeks ahead.
Understandably, people are focused on the here and now and not about what will happen one, two or three months down the line. For now, it is about anything that keeps the doors open. An example is that 78% of firms are using cash from within their business to sustain employment and other costs. A small number of firms even confirmed that they were using savings / pensions to fund this current period.
The biggest issues remains a lack of certainty on the Jobs Retention Scheme. 81% of manufacturers have confirmed they have put some staff on furlough (confirming they have taken action on the intentions signalled in the NI Chamber of Commerce survey earlier this week).
72% have furloughed more than half their workforce, with 1 in 4 completely closed and 60% having furloughed more than three quarters of the workforce meaning in whole parts of the sector there is no active production taking place. The manufacturer sector is largely closed down.
Less than 1 in 5 firms have furloughed less than 10% of the workforce.
If, as the Chancellor has made clear, the furlough scheme is to avoid redundancy for now, then we have to be deeply concerned that we will be unable to restart the sector if we leave the lock down for too long. With most manufacturing taking place outside of the cities (83% of respondents), this must sound alarm bells for the economic health of provincial and rural communities in the months ahead.
Companies who may still be able to produce goods are putting in place contingency measures such as sourcing new suppliers, stockpiling, flexible working patterns including staggered shifts and shortening production lines to offset the impact of Covid-19. Many companies are also struggling to source materials and having to look for alternative suppliers.
The Government has provided it’s 3rd update to the furlough scheme overnight which is welcome but uncertainty remains until the scheme opens on 20th April. It is critical that the Government stand over their commitment to support all firms who took their advice on since 20th March and guarantee the furlough payments. To renege on this jeopardises the short and long term future of a huge part of the sector.
Two thirds have seen their markets or customers disappearing as their first or second biggest challenge with half saying that cashflow is currently one of their biggest challenges. Significantly 20% said that labour relations in the past two weeks was their biggest issue. With the potential for many firms to come off furlough on 20 April, it is important that we all work to ensure there is a clarity in our messaging to avoid unnecessary conflict in the workplace again.
Despite more flexibility being provided to banks, 30% say they still have experienced difficulty getting their needs met from either existing borrowing or from the CIBLS or other schemes offered by the Chancellor. With a rush to the banks to try to secure funding, it is understandably difficult to meet this demand quickly but hopefully the coming week will seek more requests fulfilled.
Almost 85% of businesses say that more financial support from Government is needed for the sector to sustain jobs. Our worry would be that there won’t be sufficient resources remaining in businesses or Government to mount and sustain a rebuilding exercise in the short and medium term.
More positively, more than 12% of manufacturers so far have said they have repurposed or are working collaboratively to support the NHS and others to tackle this virus. Extrapolated out from the sample, that means that perhaps 600 manufacturers have joined the fight on top of the many thousands who continue to provide priority goods and services here and in other markets.
We know now that there has not been sufficient attention to keeping or supporting firms who provide resilient supply chains for our front line and priority sectors at home. Rebuilding that has to be a focus for the Executive and Government in the months and years ahead.
Whilst it is essential the UK Government and the Executive provide clarity on when to return to production it can only be ultimately supported by customer demand. The Executive should begin to explore how this customer demand can be kick started whilst working to support the critical exporting sub sector who may have to wait for markets and global sectors to restart.
Despite the challenges, many manufacturers continue to play a direct, repurposed and supporting part in the battle against Covid-19. They need recognised and celebrated. However, these results, combined with yesterday’s report from Ulster University Economic Policy Centre, begin to unveil the scale of the challenge which awaits after we deal with the current public health emergency. Jobs are provided by a healthy economy but more importantly they provide for healthy families and communities. This requires the attention of the Executive and the UK Government.
*Note – there were 206 online responses to the survey on Tuesday 7th and Wednesday 8th April. Respondents are leaders in manufacturing across all sub-sectors and spread across NI so are representative of the sector as a whole.