A recent report by Barclays Corporate Banking has revealed that goods with a total of £1.2 billion in value are lingering in warehouses across Northern Ireland as a result of supply chain issues. These issues have plagued the manufacturing sector since the pandemic and they have still not gone away, which is a shame as they are a major drain on many companies cash flow, a problem that can be a real hindrance to their sustainability and growth.
Over 90% Of Manufacturing Businesses Holding Items In Warehouses
John Mathers, who is corporate development director at Barclays Corporate Banking in Northern Ireland, writes about this issue in an article in the Irish News and below is part of the transcript from this article. He writes that:
“Clearly, these ‘chain reactions’ are giving businesses here a major headache. The report shows that over 90 per cent of Northern Ireland manufacturing businesses are currently holding items in their warehouses awaiting completion because raw materials, ingredients or component parts have not yet been delivered from suppliers. On average, this ‘unfinished business’ is worth over £1.2m to each company impacted. All told, it is estimated that the total value to Northern Ireland business is over £1.2bn.
“Looking at the UK as a whole, the report reveals that products in the steel and metals sector are most severely affected, with £9bn worth of goods incomplete – equivalent to almost a fifth of this sub-sector’s annual UK turnover. The most affected consumer goods sector is food and drink, with delays in sourcing ingredients causing a £3bn backlog.
“As both of these sub-sectors play a significant part in Northern Ireland’s economy, this is a hefty pinch-point for local firms. UK-wide, a high value of plastic products (£2.6bn) and electronics (£2bn) are also awaiting completion.
“The trends are reflective of supply chain disruption that has challenged the manufacturing sector since the pandemic, and more than six in ten (62 per cent) Northern Ireland firms say they are still facing supply issues.
“Customer relationships are now being impacted: over half (58 per cent) of Northern Ireland manufacturers say their customers are having to wait longer for products, with 16 per cent describing the hold-ups as ‘significant’. To offset rising costs such as energy and transportation, two thirds (66 per cent) of manufacturers are planning price increases for their own products, of 33 per cent on average.
“Of course, not only do these blockages present challenges to both the production process and to customers’ expectations, but they can also give rise to financial pressures. To maintain cashflow and liquidity, over half (52 per cent) of Northern Ireland manufacturing firms are optimising their working capital cycles and 44 per cent are accessing additional bank funding. This is in line with what we are seeing across our local customer base – larger holdings of more valuable stock are driving higher funding requirements.”
The Sector Has Faced A Perfect Storm Of Challenges
He goes on to say later in the article that:
“There is no doubt that the sector has faced a perfect storm of challenges, with rising costs, the war in Ukraine, labour shortages and ongoing Covid lockdowns in China hitting supply chains hard. With over a billion pounds worth of goods trapped in Northern Ireland warehouses unfinished, we might expect to see the impact of this on turnover in 2023.
“However, one of the most impressive things about our manufacturing firms is their ability to engineer new solutions to limit the impact of the issues they face. Thanks to this adaptability and their resulting resilience, it is pleasing to see both industry optimism and a positive long term growth trend, which should give confidence going into the new year.”
It would obviously be better if they did not have to find a way around these supply chain delays in the first place, but at least the majority of companies seem to be adapting and finding solutions to ensure they can still evolve and grow. Let us hope there is some improvement to these delays in 2023.