2020 has not been kind to manufacturing. The sector has experienced a double-whammy. First, it got hit with the biggest supply chain disruption in a generation.
And not it is being whacked by a massive fall in demand, driven primarily by the fact that people aren’t leaving their homes and socialising at the rate that they once did.
Now, manufacturers across the country are calling on the government to enact a massive bailout to help them weather the standstill and come out the other side fighting.
The number of COVID-19 cases in the UK appears to be surging for a second time. According to experts, this isn’t an artefact of testing but a real event in the epidemiology of the disease.
Manufacturing groups representing more than 20,000 businesses of all sizes in technology and manufacturing say that the government needs to outline a plan to help the sector thrive, including direct support.
The argument centres on the “strategic importance” of particular industries. Manufacturing isn’t just something that is nice to have, like the leisure and tourism industry. It is vital for the maintenance of a functional and effective state.
The economy risks losing high skilled jobs worth millions of pounds of investment over the coming weeks and months if global demand doesn’t recover. Companies up and down the supply chain are still feeling the after-effects of the first lockdown and must now deal with a potential second.
While companies like DTS UK continue to supply the sector, analysts worry that any protracted shutdown will crush business optimism and slash investment. Rishi Sunak appears to be moving to prevent this but is still warning that the government’s plans will save not all businesses.
Currently, businesses in the sector are hoping for an autumn budget. The government has already hinted that it might provide additional business support in the coming months in an attempt to prevent job losses, but it is not at all clear how that will play out in the long term.
The government does have a plan, called Project Birch, which it says that it will use if it loses all other opportunities to save the British economy. But such a strategy would probably be deeply politically unpopular.
Energy, defence and aerospace would get the majority of the funding with little left over for non-critical companies in the same or similar industries.
The other option is for the government to take on equity stakes in struggling firms. This action would essentially free up cash in these firms while also providing the taxpayer with ownership over the entities – similar to what happened to high street banks in 2009.
But that’s going to be a problem for Boris and the boys. The Tory government doesn’t want a big state. That is not the manifesto on which people elected it.
And yet, thanks to various policies, that’s precisely where we are heading: state control of major industries and massive borrowing. The next time a pandemic comes along, the economy must be prepared.
