Goods with a total value of almost £2bn are awaiting completion in South West manufacturers’ warehouses because of supply chain delays according to a new report released by Barclays Corporate Banking.

The study –‘Chain reaction’ focuses on manufacturing businesses with over ten employees and looks at the impact of supply chain issues. Barclays’ research shows that eight in ten (80 per cent) of South West 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 £789,000 to each company impacted.

Products in the steel and metals sector are most severely affected, with £9bn worth of goods incomplete – equivalent to almost a fifth (19 per cent) of the sub-sector’s annual turnover across the UK. The most affected consumer goods sector is food and drink, with delays in sourcing ingredients causing a £3bn backlog. 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 nearly six in ten (58 per cent) of South West firms say they are still facing supply issues. This has been exacerbated by the invasion of Ukraine and the aftermath of the UK’s exit from the EU. Customer relationships are now being impacted: six in ten (60 per cent) of South West manufacturers say their customers are having to wait longer for products, with 12 per cent describing the hold-ups as ‘significant’. To offset rising costs such as energy and transportation, over half (52 per cent) of manufacturers are planning price increases for their own products, of 45 per cent on average. The industry is innovating to solve these challenges. Most commonly, South West businesses are increasing their storage capacity by 37 per cent to prepare for the fact raw materials are taking longer to source. Meanwhile, a third (33 per cent) are moving their suppliers closer to home within their UK supply chains, and 30 per cent have brought elements of their supply chain in house. To spread their bets, 27 per cent of manufacturers have increased the number of different suppliers they work with. To maintain cashflow and liquidity, over two fifths (42 per cent) of South West manufacturing firms are seeking a cash injection from private equity. More than a third (35 per cent) are optimising their working capital cycles and the same proportion are accessing additional bank funding and/or selling off assets to raise funds. Businesses have also doubled down on their commitment to sustainability despite supply chain pressures. Three quarters (75 per cent) of manufacturers say carbon reduction has become an even bigger priority in the past six months, despite over two thirds (67 per cent) saying their environmental goals have become less attainable. Amidst the business optimism, however, the report also lays bare the threat that rising costs and supply chain disruption could pose long-term if circumstances do not improve. On average, South West manufacturers only expect to be able to sustain their operations for 16 further months if current conditions continue.

Lee Collinson, Head of Manufacturing, Transport and Logistics for Barclays Corporate Banking, said:“The British manufacturing sector has faced a perfect storm of challenges this year, with rising costs, the war in Ukraine, labour shortages and ongoing Covid lockdowns in China hitting supply chains hard. As a result, billions of pounds worth of goods are trapped in warehouses unfinished, and this may hit industry turnover in the early part of next year.“However, manufacturing firms have done what they do best and engineered new solutions to limit the impact of the issues they face. As a result, many businesses will enter the new year with a degree of cautious optimism and confidence.”