Make UK, the manufacturers’ organisation which champions engineering and manufacturing across the UK, has released its Q3 Manufacturing Outlook report for 2021. The good news is that it reveals accelerated growth in the sector and hope for the future after damage caused by the pandemic. But what lessons can be learned from the last year and how can manufacturers mitigate the risk of supply chain disruptions as they fight for a new future? Lisa Birch from A-Plan Corporate Insurance, part of the Howden Group, gives us her view.
The latest industry figures revealed in Make UK’s Manufacturing Outlook for Q3 of 2021 make for encouraging reading for the sector, and provide a real opportunity to strengthen business models and insurance cover for a healthy future. Make UK’s report, published in partnership with BDO, reveals that following a series of sharp declines in output and orders last year, manufacturers are reporting a swift bounce back as new business returns to high levels for many across the sector. It’s a comeback, which has been built on hard work, flexibility and resilience – and has been delivered by a record rise in both domestic and overseas orders. With the industry on the up, the question now is how can the sector be better prepared for future risks, whether that is another pandemic, weather-related impacts, political changes or an economic downturn?
In addition, how can it cope with ongoing challenges, which include the continuing impact of Covid-19 on global trade as well as the Trade Cooperation Agreement (TCA) between the UK and the EU following Brexit?
Supply chain disruption Both of these issues are causing significant supply chain disruptions, and potential insurance pitfalls. Overordering stock to cope with rising demand and to protect a business against supply chain problems can lead to over-filled warehouses – and leave businesses in danger of failing to abide by requirements and recommendations imposed by insurers.
This includes:
- Breach of clearance restrictions e.g. impairing sprinkler systems
- Blocking fire doors
- Goods stored outside close to the premises
- Overall impact on good housekeeping
- Congested shop floor areas
The consequences of these oversights are severe. They can impact balance sheet protection because claims may not be paid, leaving businesses at risk. Other insurance issues in the current climate include longer lead-in times for replacement machinery, which means businesses should check if their business interruption indemnity period is long enough. It is also important to consider if material damage sums insured are still adequate when a company grows and costs rise, and to ensure that insurers have been informed if manufacturers have pivoted during the pandemic to produce different types of goods.
Key Stats from the Make UK Manufacturing Outlook (all based on the balance of change in the quarterly figures)
- Business confidence has reached its highest level for a single quarter since 2014 at 7.7
- Output is up 42% – the highest on record.
- UK orders are up 48% – the highest on record. The prediction for the next quarter is 50%
- Export orders are up 37%, and recovering quickly
- Employment is up 23%, the second rise since Q1 of 2020 with jobs continuing to grow but at a slower rate
- Investment intentions are up 37%, the highest on record
Building resilience through insurance cover
Business resilience is important at all times, but perhaps even more so when businesses are re-adjusting – and it dovetails with what the insurance market is asking for now. From a risk and risk management point of view there are a couple of really crucial areas to consider as businesses grow. The insurance market has been absolutely ruthless in recent times, which means to have the insurance you need it is vital to do things right – especially if you are growing fast and struggling to find space in the warehouse for goods being stored.
Robust Business Continuity Plans
Events over the last 18 months have demonstrated the need for businesses to adapt and change their working model overnight. It is therefore critical for manufacturers to have a resilient Business Continuity Plan, one that is documented and tested on a regular basis, and then reviewed.
Insurer Risk Improvements – No more extended deadlines
One issue that has emerged over the last year is that insurers are no longer willing to go beyond their deadlines, which puts pressure on manufacturers to stay on top of requirements mandated by insurers. In the past, maybe it was possible to have an extension by two or three months for completing this requirement, but not now. The date is the date and insurers rarely move from it. This means that when it comes to maintaining material damage and business interruption insurance, businesses need to be absolutely sure they have done everything in their power to comply with insurer and survey requirements, suggestions and recommendations. Doing that puts a business in a much more powerful position with their existing insurer and when they go to market.
How A-Plan Corporate can help
An in-depth risk health check is available to prepare businesses for what lies ahead, and A-Plan Corporate also provides a free on-site risks review for the manufacturing sector. Talking to our experts regularly can ensure you have the right cover and the right strategy to grow a business. The bottom line is that when it seems like times are good, it is vital manufacturers don’t lose sight of where they really need to be, or what challenges lie around the corner. Embracing risk assessment and risk management now can build resilience for the future and keep British manufacturing on an upward curve.
A-Plan Corporate. The broker taking care of the makers. Call 0330 175 7485 or email [email protected]
More information: www.aplan.co.uk/corporate
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