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Medium term history

In the last five years, turnover in the UK Industrial Manufacturing sector has been broadly flat, with the last set of data showing it just under £38bn. Looking at the sub-sectors that make up Industrial Manufacturing, Packaging (turnover: £10bn) experienced a 4% reduction over the period whilst Machinery & Equipment (turnover: £28bn) saw a 1% increase.

Across 2019, activity in the UK Industrial Manufacturing sector weakened substantially, with output shrinking at a faster pace and new orders falling for the seventh month in a row. With three consecutive results of declining manufacturing activity, the sector is now at levels not seen since the global financial crisis.

Prior to COVID-19, the sector was being impacted by a range of both domestic and global factors. In the UK, a strong start to the year was driven by stockpiling ahead of the original 31 March 2019 Brexit date. Since then, uncertainty from Brexit contributed to subdued demand, both in the B2C and B2B segments of the economy. Businesses responded by fulfilling orders from existing stock rather than new production, leading to further contraction in industrial activity.

A deferral of capital spend by businesses on new plant and equipment further contributed to a relative lull in orders, with many not operating to full capacity.

Internationally, 2019 bore witness to a slow-down in economic activity in the UK’s largest trading partners, driven principally by geopolitical tensions. Additional tariffs introduced through the US-China trade dispute have placed additional strain on global supply chains, directly impacting on UK manufacturing exporters.

Current outlook and challenges

The outbreak of COVID-19 has disrupted virtually every area of the manufacturing sector. Though the sector is broad, and the impact has varied from business to business, some key issues we’ve noted include:

  • Initial worries around supply chain disruption from China and Far East plants has been overtaken by broader concerns regarding supply chain failure. Many manufacturing businesses operate with relatively low stocks and/or single supplier contracts. As such, supply chain failure will likely have a major operational and financial impact
  • Operational challenges associated with social distancing remain, whilst also adding new costs e.g. daily deep cleaning, increased staff absenteeism, reduced productivity etc.
  • Many businesses have paused capital expenditure projects. Whilst there may be run-off of existing projects/contracts, for many businesses obtaining new orders/contracts in the months ahead may prove challenging
  • Liquidity will remain the key challenge for many manufacturing businesses, minimising cash outflow, drawing down on existing lending facilities and streamlining some operations

Some industrial manufacturing businesses have been able to adapt effectively, for example retooling production lines in order to support the global pandemic response or moving from B2B to B2C products and distribution channels. In the long-term, a possible trend towards reshoring may bring benefits as operational resilience becomes a strategic priority. For most, however, there remains a period of significant uncertainty as government economic support is reduced.

Many of the pre-COVID issues have not gone away either. Brexit remains a further area of uncertainty hanging over the UK economy, as are global tariff disputes. The green agenda remains a priority, which governments may link to any post-COVID public sector support.

Stress and distress temperature rating

Industrial Manufacturing sector temperature assessment as at 1 June 2020, covering medium term history and outlook:

Graphic showing the Industrial manufacturing sector stress and distress temperature rating

Key trends across the sector right now

  • Increased risk of supply chain failure impacting on ability to continue trading
  • Decline in new orders from customers seeking to conserve cash and limit non-essential capital expenditure
  • Operational and financial challenges posed by social distancing requirements
  • Economic downturn at UK’s main trading partners, impacting on growth prospects of export-oriented firms
  • Global geopolitics tensions, creating uncertainty on tariffs
  • Rising input costs putting pressure on margins
  • Shape of future relationship with the EU remains unclear, impacting on investment and EU exports
  • Digital disruption and adoption of Industry 4.0
  • Industry response to climate change and impact on revenue streams and physical supply chain

Case studies

Plastics fabrication company, cashflow forecasting and early options review

The Group, with turnover of approximately £140 million, first engaged KPMG to provide cash forecast reporting, general stakeholder management and contingency planning.


KPMG were further engaged by the Group to undertake an Early Options process to identify other accelerated sale options available to the Group, which facilitated the pre-packaged sale of the business and assets of the Group, preserving 1,016 jobs.

Electronics manufacturer, insolvency

KPMG were appointed to administer the insolvency of this manufacturer of IT network components, after the business faced difficulties as a result of declining work volumes, and high fixed cost base.


Circa 30 employees were retained to preserve the main facility on a care and maintenance basis, and to help the Joint Administrators explore a sale of the business.

Industrial valves manufacturer, profitability review

A supplier of valves to the Oil & Gas industry was not delivering the revenue growth or profitability levels of its competitors.


KPMG performed a profitability analysis and identified that the majority of losses were driven by under-pricing and poor procurement procedures.


KPMG UK's national sector teams

Contacts on this page are specific to KPMG Restructuring sector capability. Our Restructuring sector contacts also work as part of KPMG’s national sector teams that comprise members from across our wide range of practice disciplines, e.g. Deals, Consulting, Tax and Audit. To find out more about KPMG’s wider views in this sector, click here.