Subcontract market falls back to 2015 levels
Published: 9 July 2019 - Rachael Morling
According to the latest Contract Manufacturing Index (CMI), the UK subcontract manufacturing market has broken its steady upwards trend and crashed back by 37% in the second quarter of 2019 compared to the first three months of the year.
The index dropped to 101, just one point higher than the baseline figure of 100, which represents the average value of the subcontract market between 2014 and 2018. This is the lowest it has been since the first quarter of 2015 when the index was first published.
Until this quarter the market had been steadily rising to reach a peak of 194 in March this year.
Within the headline figures both machining and fabrication fell sharply, while other processes, including moulding and electronic manufacturing, bounced back slightly in May.
The market was fairly evenly split with machining representing 43% of the value of contracts placed and fabrication representing 40%.
The CMI is produced by sourcing specialist Qimtek www.qimtek.co.uk 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.
Commenting on the figure, Qimtek owner Karl Wigart said: “The market had been holding up well in the face of uncertainty over Brexit but dropped significantly in April when the UK had been due to leave the EU.
“April, May and June all saw a steady decline in the index, with the larger companies simply not sending out projects. This was particularly visible in the West Midlands, the heart of the automotive industry.
“This suggests that OEMs had factored a high level of precautionary Brexit stockpiling into their 2019 production schedules and then had to run these stocks down once the leaving date was postponed.”