Stop-start recovery for subcontracting

According to the latest figures, the UK market for contract manufacturing in the second quarter of 2021 was down by 8% on the previous quarter, but 57% higher than it was a year ago.

The latest Contract Manufacturing Index (CMI) stood at 77 for the second quarter (Q2) compared to 84 for the first three months of this year. The headline figure conceals a volatile market in which April and May continued the slump seen at the end of Q1 – falling to the lowest level since a year ago – but jumped back in June to the highest level since August last year.

At the end of June the market was 10% higher than in the quarter preceding the pandemic. This strong growth has continued into July but the market is still very sensitive to uncertainty in materials supply, transport shortages and the number of people having to self-isolate due to COVID.

The CMI is produced by sourcing specialist Qimtek and reflects the total purchasing budget for outsourced manufacturing of companies looking to place business in any given month. This represents a sample of over 4,000 companies who could be placing business that together have a purchasing budget of more than £3.4bn and a supplier base of over 7,000 companies with a verified turnover in excess of £25bn.

The baseline for the index is 100, which represents the average size of the subcontract manufacturing market between 2014 and 2018.

The strongest sector in Q2 was the electronics industry, which was up 30% on Q1. Construction was three times higher than in Q1 but industrial equipment was sharply down. Agriculture, oil & gas and consumer products showed strong growth.

Fabrication work accounted for 47% of the subcontract market – down from 57% in Q1. Machining work, in contrast, was up from 32% to 44% of the total. Other processes, including moulding and contract electronic manufacturing, accounted for the remaining 9%.

Commenting on the figures, Qimtek owner Karl Wigart said: “The quarter started slowly but picked up very strongly in June and this has carried on into July.

“We hope the flow of new contracts will continue but there is still a lot of uncertainty among buyers and suppliers. Will the market hold, is there enough raw material and will COVID rear its ugly head again?”

Qimtek
www.qimtek.co.uk