The cost of living crisis has been a daily mention in the news for the majority of 2022. With inflation soaring and consumer spending habits altering as a result, the manufacturing industry has inevitably been impacted.
At the end of 2021, manufacturing organisation Make UK and business advisers BDO stated that their research had shown that while industry growth remained positive, there was evidence of slowing activity. Almost one year later, their predictions still ring true, with inflation rising by 9.6% in the 12 months to October 2022.
There has been a broad domino effect on the manufacturing industry as a whole, which has then also impacted workers and consumers as a result.
Which areas of the manufacturing industry have been affected?
Cost of labour - with inflation and the cost of living crisis comes an unavoidable increase in the cost of labour. At Scantec, we have found that workers are, understandably, looking for an increase in wages in order to live comfortably and be able to pay their household bills.
Sara Frith, Division Director within Scantec’s FMCG division has seen that his has put a strain on manufacturing businesses:
“90% of manufacturing firms say higher raw material costs are an issue and report rising wage demands causing pressure. Salary is now a top priority for 40% of job seekers due to increased cost of living.
Cost of products - with the production of food, for example, increasing in costs for businesses across the company, the inevitable knock-on impact has resulted in rising prices in supermarkets. Food production is not just impacting manufacturing companies; consumers are also being affected, with food price inflation surging to the highest rate in 14 years during 2022. Lurpak butter was famously priced at £9.35 in Iceland supermarkets earlier this year.
Supply chain disruption - suppliers have attributed recent disruption and delays to the rising cost of energy, rail strikes, fuel, the pandemic, a shortage of HGV drivers, Russia’s invasion of Ukraine, and the ongoing impact of Brexit. Generally speaking, there have been varying factors that have contributed to manufacturing supply chain disruptions, reaching almost every person as a result. Food manufacturing has been the most discussed in the media, but clothing, furniture, machinery, vehicles and chemicals have all experienced supply chain disruption related to the cost of living crisis.
Gas and fuel prices - Russia’s invasion of Ukraine hasn’t just impacted the supply chain - it’s also affected gas and fuel prices all over the world, including in the UK. With Russia being one of the world’s biggest suppliers of fuel, and the manufacturing industry relying on fuel to transport goods, businesses have been impacted massively in the form of increased gas prices, slower production times, and slower delivery times.
The manufacturing industry is resilient
Despite the cost of living crisis, inflation, Russia’s invasion of Ukraine, the pandemic and Brexit all impacting manufacturing businesses and consumers as a result, business leaders have shown incredible resilience throughout 2020, 2021 and 2022.
Sara Frith said:
"The manufacturers in sectors such as farming, logistics and high-energy / CO2 industries have been impacted, as well as those importing raw materials. Luxury brands have also been impacted but in spite of this, I am seeing many success stories too. Businesses are working hard within innovation to move forwards.”
With so many economic factors affecting the industry as a whole, manufacturing business owners and directors have played a key part in maintaining revenue, paying workers and servicing customers to the best of their ability.
Laura Capper, the Royal Bank of Scotland’s Head of Manufacturing and Construction, said: “During the pandemic, manufacturing businesses demonstrated extreme resiliency. While the current inflationary environment creates even more pressures, we feel there are ways to pivot and adapt to rising input and output costs.”
Sara suggests that manufacturing companies continue to invest heavily in the following, to avoid needing to make difficult business decisions:
- Prioritising employee wellbeing, and employee retention
- Adapting prices to keep customers on board
- Utilising technology to minimise wasted time in the workplace and increase productivity
- Opting for cheaper and/or smaller packaging options
- Avoiding business loans where possible
- Asking for feedback from employees and consumers on how to improve
Regardless of the current climate, businesses in all sectors - including manufacturing - need to plan ahead for possible changes in the industry, and adapt to ongoing challenges.
With feedback from employees and customers, monitoring how your competitors are growing their businesses, and remaining mindful of possible financial challenges in the future, the cost of living will have a noticeable impact on your business - but not a detrimental one.
Get in touch
If your manufacturing business is hiring, get in touch with Scantec for help with finding the top talent to fill your roles.
