UK manufacturers are facing a sharp rise in costs as the Russian invasion of Ukraine undermines the progress made towards fixing global supply chains before the conflict broke out, economists have warned.
Factory production jumped in February amid rising domestic demand, fewer raw material shortages and easing global supply chain pressures, according to the latest snapshot from IHS Markit and the Chartered Institute of Procurement and Supply (Cips).
In a sign the worst of the disruption caused by the pandemic could have peaked, companies said the number of delivery delays fell last month to the lowest since November 2020.
However, experts said the conflict in Ukraine – which has triggered a surge in oil and gas prices, as well as renewed supply chain disruption – would hit firms across Europe and drag down industrial production over the coming months.
Mike Thornton, the head of manufacturing at the accountancy firm RSM, said: “As the Russia-Ukraine conflict unfolds, UK manufacturers should brace for some additional headwinds. The surge in energy prices is the most obvious for heavy industry.”
Russia is the world’s largest exporter of natural gas and among the top suppliers of crude oil, commodities such as wheat, and metals including palladium, platinum, gold and aluminium.
“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,” Thornton added.
Soaring energy costs and supply chain disruption caused by Covid have driven inflation to the highest levels in three decades. Analysts had hoped the cost-of-living squeeze would fade as pandemic restrictions are removed, although now warn the Russian
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