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Stockpiling reached near-record levels at the end of 2020

Activity in the manufacturing sector reached a three-year high in December as customers rushed to beat the end of the EU Transition Period, causing supply chain disruption and longer lead times.

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According to the UK Manufacturing Purchasing Managers’ Index (PMI) for December, which was compiled before the announcement of the EU free trade deal, new orders rose at the fastest pace since August. Overall output from the manufacturing sector also rose for the seventh month running.

The expansion during the month was reportedly due to customers - especially those in the EU - bringing forward orders to guard against potential border delays and other disruptions at the end of the EU Transition Period. Purchases also rose at the third-fastest rate in the index’s 29-year history as manufacturers built up stocks ahead of the 31 December deadline.

The flurry of activity contributed to substantial disruption to supply chains in December, resulting in raw material shortages, port delays and freight capacity issues which were then compounded by countries closing their borders to protect against the new strain of COVID-19.

Duncan Brock, Group Director of the Chartered Institute of Procurement & Supply (CIPS), commented: 

“New orders rose at one of the fastest rates since January 2018 in the last quarter of the year as both UK and European firms stockpiled goods and materials at a fair lick in an attempt to sideline further disruption this winter.

“This rush to secure supplies meant already stressed supply chains paid the price with some of the longest delays in the near 30-year survey history. Bunged up ports caused backlogs to rise to levels not seen for a decade and optimism for the year ahead dropped to a six-month low as the challenges for manufacturers just kept coming.

“After a severely turbulent year, UK makers still have a great deal to worry about. Job numbers continue to fall, and material shortages have resulted in the highest cost inflation since 2018. The sector is holding its breath until the terms of the new [EU trade] deal are fully understood and whether new business can be sustained in the same way in a post-Brexit marketplace.”

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