FINANCE NOVEMBER/DECEMBER 2020
2020 Vision: Looking
back on a year unlike any other
In a new column, Lloyds Banking Group refl ects on the state of the manufacturing industry
and the outlook for the months ahead
BY HUW HOWELLS, MD, HEAD OF MANUFACTURING AND INDUSTRIALS,
CORPORATE AND INSTITUTIONAL COVERAGE, LLOYDS BANKING GROUP
N one of us have ever seen a year
quite like 2020.
The coronavirus pandemic
created unprecedented challenges for
manufacturers and, though the sector
enjoyed some exemptions from certain
lockdown constraints, for some the
adversity may sadly have proved
Falling consumer confi dence, supply
chain disruption and trade and travel
restrictions meant manufacturing output
was down almost 30% in April
(https://bit.ly/2J7vmVU) and, while it has
rebounded since, the sector is still facing
Many of Britain’s biggest manufacturers
are adjusting production to meet reduced
market demand, which may mean
restructuring their businesses or even
closing some plants.
But let’s not forget the heroic eff orts of
those manufacturing businesses that have
stepped up to the plate to keep the nation
supplied with essentials during lockdown.
A voice for manufacturers
We believe it’s important that
manufacturers have a voice to share what’s
leading their agendas, which is why we
surveyed more than 200 executives at large
manufacturers (£50m+ turnover) for our
recent Business in Britain report.
This insight also helps us shape our own
strategy on how best we can support
The survey responses were sobering, if
not entirely unsurprising: two thirds had
seen revenues fall, by an average of 20%.
This likely refl ects the UK’s strength in
aerospace and automotive, both sectors
that were hit hard by travel restrictions
and low consumer confi dence. We also
have many leading pharmaceuticals and
food and drink businesses, which have
fared much better.
But, in a sign that the government’s
With the end of the Brexit transition
period upcoming, it’s more important than
ever that British manufacturers become as
productive as possible to stay competitive
on the international stage.
And boosting effi ciency will be vital to
ramping up output again, especially as so
many fi rms have had to cut jobs.
Innovation and ambition
At the same time, more than half (56%)
have either maintained or ramped up their
R&D investment, with almost half (48%)
expecting new products and services to
drive their growth.
While that bodes well for the future, we
did fi nd two in fi ve (41%) manufacturers
said they were investing less in R&D
because of COVID-19.
It seems that, for some fi rms,
innovation has fallen down the agenda as
they are forced onto the back foot to deal
with the current crisis and divert funds to
things like PPE and other measures to
While almost a quarter (23%) of the
fi rms that have reduced their R&D spend
say it will return to pre-pandemic levels
within six months, more than a third (37%)
say it will take six to 12 months and a fi fth
(21%) forecast it will take one to two years
to bounce back.
Manufacturers’ sustainability plans have
proved more robust: just 13% said the
pandemic had delayed plans to make their
operations more environmentally friendly.
And a quarter (23%) have used
lockdown to review or improve their
I feel we can take heart from the actions
taken by manufacturers during 2020.
Faced with an almost impossible
situation, many have shown they are
adaptable, innovative and ambitious.
With qualities like these, I believe
British manufacturers can look to the
future with confi dence.
support for businesses has helped mitigate
some of the pandemic’s most immediate
economic consequences, two-thirds of
manufacturers told us they had furloughed
staff , while nearly half had accessed
government lending schemes.
Indeed, British manufacturers are
resilient and were able to rapidly adapt to
the new landscape.
They also told us about the plans they
are progressing to build back better, and
there is much cause for optimism for 2021
after the challenges of 2020.
Around three-quarters (74%) have
already enacted or developed plans to
harness the disruption to make their
business more effi cient going forward.
That’s especially encouraging because
Britain has been stuck in a productivity
slump since the fi nancial downturn of 2008.