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warehouse stock, supply chain disruptions

Goods worth billions jam UK warehouses due to supply chain disruptions

Unfinished goods worth billions jam UK warehouses due to supply chain disruptions since the start of the pandemic.

Supply chain disruptions have resulted in nearly £3.5 billion worth of unfinished goods sitting in Scottish manufacturers’ warehouses.

A new report by Barclays Corporate Banking reveals that 86% of Scottish manufacturers with more than 10 employees are yet to finish goods because they are waiting on the delivery of raw materials, ingredients, or component parts.

Each affected business loses an average of over £1.8 million due to this “unfinished business.”

The steel and metals sector is the hardest hit, with £9 billion worth of incomplete goods, or nearly a fifth (19%) of the subsector’s annual turnover.

Among consumer goods, the food and beverage industry is the hardest hit with a £3 billion backlog due to delays in sourcing ingredients.

Plastic products worth £2.6 billion and electronics worth £2 billion are still in the production phase.

Three out of five businesses (59%) say they are still experiencing supply issues, reflecting the trends of supply chain disruptions that have challenged the manufacturing sector since the pandemic. The invasion of Ukraine and the aftermath of the UK’s decision to leave the EU have both made the situation worse.

Companies are developing new approaches to address these problems. Many companies are boosting their storage space (39%), anticipating a longer lead time for raw materials.

Three-quarters of businesses (33%) are “nearshoring” to bring their supply chains closer to home, and 32% have “friend shored” to partner with suppliers in countries that have an established trading relationship with the United Kingdom. 37%  of manufacturing firms have increased the number of suppliers they purchase from as a risk-management strategy.

Over two-fifths (42%) of manufacturing firms are optimising their working capital cycles, and the same percentage is also accessing additional bank funding to maintain cash flow and liquidity. A third (32%) are liquidating assets and 38% are trying to attract private equity investment.

Despite nearly three-quarters (73%) of manufacturers reporting that their environmental goals have become less attainable, nearly two-thirds (64%) say carbon reduction has become an even bigger priority in the past six months.

Contrasting general business optimism, Barclays’ report highlights the potential dangers of rising costs and supply chain disruptions if conditions do not improve. Under the current economic climate, British manufacturers predict they will only be able to stay open for another 15 months, on average.

Industrial energy transformation (37%) and a more aggressive energy price cap for the industry (32%) are the top two interventions that manufacturing firms would like to see from the government.

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