Ukraine crisis set to hit supply chains
02 March 2022
The latest CIPS UK Manufacturing Purchasing Managers’ Index has increased from 57.3 to 58.0 with manufacturing production growth in February being driven by output jumping back up to 79.5 following a slight lull in January due to Christmas shutdowns; and it looks like manufacturers are recruiting less in February than at the start of the year, suggesting that businesses are filling much-needed roles.
The crisis in Ukraine
As the Russia-Ukraine conflict unfolds, the primary concern of course is a humanitarian one, but it is also important to note that UK manufacturers should brace for some additional headwinds. The surge in energy prices is the most obvious for heavy industry. The pressure is already being felt with unleaded petrol prices reaching record highs at around 150p per litre as oil prices surged to $105 per barrel as fears over supply increase.
The conflict could also squeeze input pricing on certain products. Russia is a major exporter of natural resources including palladium, platinum, gold, oil, gas and aluminium which could put further tension on supply chains. The recent shortages of components, such as microchips, could continue and expand into other areas as sanctions and export restrictions limit supply that feed into the wider supply chain.
Russia and Ukraine are dominant exporters of wheat and corn so food manufacturers could be acutely hit if the conflict continues. Supply could be disrupted which would push prices up further as capacity is reduced.
In addition, the geopolitical tensions will also play out in the digital space as cyber criminals look to exploit periods of crisis and uncertainty. The manufacturing sector sits within the top three targets for cyberattacks in the UK, and as the cyber risk increases, so does the financial, operational and reputational risk for manufacturers.
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