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Subcontract manufacturing sector continues recovery
The UK market for subcontract manufacturing has continued its recovery from the effects of the Covid-19 pandemic, with a 25% increase on the previous quarter.
The latest Contract Manufacturing Index (CMI) stood at 84 for the first quarter of 2021, compared to 67 for the final three months of 2020. The quarter started well, with January and February far better than any month in the previous quarter, but fell back in March.
The baseline for the index is 100, which represents the average size of the subcontract manufacturing market between 2014 and 2018. At the end of the first quarter in 2020, before the pandemic took hold, the CMI stood at 112, so the market is still 25% down.
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.
Within the overall figures for Q1, there were significant changes in processes and markets. Fabrication work made up 57% of the contracts, up by 131% on the previous quarter. Machining, in contrast, fell from representing over half of the market to just over a third.
Industrial equipment was the strongest sector in the final quarter of 2020 and not only retained the top spot in Q1 but grew by an impressive 90%. The second strongest sector was furniture, followed by electronics. Communication equipment was in fourth place and construction staged a strong recovery to take fifth place.
Qimtek owner, Karl Wigart, said: “In the light of what we are seeing in the wider manufacturing economy, we might have expected the figures to have been a bit stronger. But, as we noticed in the previous quarter, there are still bottlenecks in material and transport that are resulting in projects taking a longer time than normal to come to fruition. However, we are seeing an increase in the number of projects awarded to our members, and at a higher average price than we have seen for five years.
“When we came out of lockdown last summer there was a strong uptick in the subcontracting market and, as we come out of lockdown again, it would be reasonable to expect a similar boost.”