Managing distress in the manufacturing sector

Out-Law Guide | 21 Jul 2020 | 11:47 am | 5 min. read

Business leaders in the manufacturing sector will need to take a brave, critical look at future business models or explore some form of restructuring process to protect their companies against the economic challenges arising from the coronavirus crisis.

The disruption to supply chains, a drop in consumer demand for 'high-value' goods in anticipation of a long recession, and increased costs of compliance with public health rules and guidance are together putting manufacturers under financial strain. Even those businesses that were on a strong-footing prior to the pandemic are likely to find themselves faced with a changed marketplace

Companies seeking a successful future will need to turn from their traditional methods and instead take bold and strategic approaches to existing priorities.

They will also need to think about how to create a resilient supply chain regime

Technology promises to play a central role in enabling manufacturers to innovate and revolutionise their processes, as automotive giant Ford has predicted will result from its new 5G partnership with Vodafone for example.

With manufacturing plants of the future becoming increasingly connected and data-driven, manufacturers that fail to invest in technology risk falling behind competitors. Those businesses that can look forward and offer transformation of their services, making use of the corporate and insolvency tools available to them, will be best placed to thrive in the aftermath of the Coronavirus crisis.

Companies seeking a successful future will need to take bold and strategic approaches to existing priorities.

A resilient supply chain is vital, and it is important manufacturers know the options open to them under the UK's new Corporate Insolvency and Governance Act to protect their interests and, potentially, work through problems they or their suppliers are having when in financial distress. Engagement should be an early stage in any stressed scenario.

Our automotive and manufacturing specialists have put together a working checklist to support manufacturers experiencing operational or financial distress as they exit lockdown and look to future-proof their businesses.