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The effects of coronavirus on UK industry

On 31st December 2019, it’s safe to assume not many people in the UK had heard of “coronavirus” or COVID-19, but on this date China alerted the World Health Organisation of several cases of unusual pneumonia caused by an unknown virus, in Wuhan, a port city of 11 million people in the central Hubei province of China. By 7th January 2020, the virus was identified as belonging to the coronavirus family. The following weeks saw rapidly increasing reports of confirmed cases of the infection in China and multiple cases across the globe. As of 27th February, there was over 82,000 confirmed cases of the infection.

While these figures are spread over 60 countries and mainly concentrated in China, here in the UK, 13,525 people have been tested, of which 13,485 were confirmed negative and 40 positive (correct at time of publish 03/03/20).2 The effects of this outbreak are also taking their toll on UK industry, as recently reported by Industry Analyst John Griffin for IBIS World. The UK economy’s highly globalised and market-orientated nature put it at risk as trade with China, the UK’s second largest trading partner outside of the EU, becomes strained.

(Update – As of 10th March there are over 110,000 global cases over 110 countries, with 373 in the UK).

Some of the facts:

“According to HMRC trade data, China accounted for 6.4% of total UK exports in 2019, and 8.6% of total imports. According to the Observatory of Economic Complexity, the main product exported to China is motor vehicles, while car parts manufactured in China account for approximately 1% of imports from China. This has led UK car manufacturers to express concerns regarding the fallout of the outbreak, with Jaguar Land Rover warning it could run out of car parts at its British factories in March, while the company’s chief executive also added that it is currently making no sales in China, which usually accounts for 14.3% of exports in the Motor Vehicle Manufacturing industry. Meanwhile, yellow digger maker JCB has announced cuts to production and working hours, with more than 25% of its component suppliers in China closed as a result of the COVID-19 outbreak.”

Other effected industries:

“Several other major firms are dependent on a supply chain that includes China, and the UK’s accountancy regulator has urged firms with close trading links to China to report the full extent of the risks caused by the virus. UK-based luxury brand Burberry Group has expressed concerns over sales dipping in mainland China, with the company forced to close 24 of its 64 stores in the country as a result of the outbreak. Meanwhile, London-based bank HSBC, which relies on Asian markets for most of its profit, stated that it would have to set aside up to £460 million to cover additional costs to deal with disruption caused by the outbreak. Anglo-Swedish drug maker AstraZeneca has also warned of the unfavourable impact of the outbreak, with China currently the fastest growing region for the company. Possibly the best indicator of the global impact of the COVID-19 outbreak is Apple, with the tech giant warning that disruption in China, which accounts for one-sixth of its global revenue, will lead to the company falling short of revenue forecasts.” 3

Exports and imports by industry:

IBIS World recently ran the figures from their extensive research database to show which industries in the UK export and import (as a percentage) the most goods, products and materials to/from China, and therefore more likely to struggle with the knock-on effects of coronavirus.

Top 10 industries by percentage of exports

Top 10 industries by percentage of imports

“Although the overall scale of the impact of the COVID-19 outbreak remains uncertain, the spread of the virus is expected to continue to dominate global markets and news in the near-term. Avoiding a global pandemic is expected to be key to containing the effects of the virus; however, in the short term companies are expected to have to divert supply chains away from China and continue to adjust sales forecasts in line with plunging demand from Chinese consumers.” 3

Is your industry seeing adverse effects from coronavirus? Join the discussion and keep in touch with Westgate on Facebook, LinkedIn and Twitter.

Visit nhs.uk/conditions/coronavirus-covid-19/ and gov.uk/guidance/coronavirus-covid-19-information-for-the-public to learn more about the current advice regarding coronavirus.

Sources
1 aljazeera.com/news/2020/01/timeline-china-coronavirus-spread-200126061554884.html
2 gov.uk/guidance/coronavirus-covid-19-information-for-the-public
3 ibisworld.com/industry-insider/analyst-insights/swiftly-spreading-the-effects-of-coronavirus-on-uk-industry/
Image – freepik.com

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