Coronavirus and manufacturing - what’s happened so far

Since the discovery of Covid-19 in Wuhan, China last December, the virus has spread across the world, hitting 80 different nations and infecting more than 90,000 people.

In addition to health and travel concerns, coronavirus has potentially serious implications for the UK economy, particularly for the automotive sector. Last year, the industry suffered the worst period of decline since 2001 and the coronavirus certainly isn’t going to help matters.

China, who makes up a third of world manufacturing, saw factory activity drop a record 29% in February. China isn’t alone in its reduced manufacturing output either. Car production lines in South Korea and Japan have been halted or hampered, and even UK-based manufacturers are expecting 20% of workers to be absent during the outbreak’s peak.

This effect of coronavirus on manufacturing across the world has severe consequences for the automotive sector. In particular, we’re seeing implications for:

Production

With UK car manufacturers reliant on lean manufacturing methods, big names such as Jaguar Land Rover and Aston Martin are running out of parts. Last month, Jaguar Land Rover announced production was suspended across all UK plants, and plan to resume on 20th April. This announcement followed global automotive names including BMW, Toyota, Honda, Nissan and Vauxhall announcing similar UK plant closures.

It’s not just car manufacturers that are issuing warnings either. Scotland-based AGM batteries has said that the impact of coronavirus on supply chains could seriously hamper the UK’s electric car strategy.

Demand

The impact of coronavirus on the automotive sector isn’t limited to manufacturing and production. It appears that the virus is hindering consumer spending, with car sales in China alone falling by 92%. Industry events such as the Geneva Motor Show are also being cancelled, giving the sector less opportunity to alleviate consumer concerns and drive customer demand.

Investment

Uncertainty curbs investment and the automotive sector certainly knows this following the decline in funding after Brexit. The coronavirus could have a similar effect, with some experts concerned about a potential stock market crash, especially if the outbreak causes a Chinese recession.

Coronavirus and manufacturing - what to expect next

The next few weeks are crucial for the manufacturing and automotive sectors. Although the SMMT released figures recently showing only a slight drop in automotive production figures, they warn of a much sharper drop to come, due to coronavirus.

Funding is a real concern for many businesses now, and whilst uncertainty surrounds the next few months, the Government has announced several measures and benefits to help businesses through this challenging time.

Existing funding schemes like R&D tax credits shouldn’t be forgotten at this time either – with the average claim value being £54,000, which can be awarded as a reduction in Corporation Tax, or even cash.

If you’re interested in innovation funding, then get in touch with a specialist like MPA. MPA uses expertise, experience and knowledge to support businesses with funding through government incentives such as R&D tax credits and Patent Box. For more information, visit mpa.co.uk.