ITSA member summary 2020

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As we all know 2020 was one of the most challenging years many of us can remember and this is reflected in the results of our membership.

Year on year comparisons are not necessarily reflective as the market was affected globally by a pandemic that had totally unexpected impact on every aspect of our members businesses.

In the background of all of this we also had BREXIT which had added to the uncertainty and there appeared to be a degree of “contingency stocking” taking place across many industries to protect against a no deal, in the end an 11th hour deal was reached so we all moved back from the cliff face but the true impact is still unknown. ITSA membership will be producing a report on the BREXIT deal and how it has impacted their businesses shortly.

Overall in 2020 our membership saw a UK revenue decline of around 10% but orders were down 14%, interestingly the Export data reported was very similar to this. Members revenues for 2020 had dropped back to 2017 levels.

Despite the reduction in sales for 2020 the feedback in the industry is that profitability was maintained or only minimally impacted due to short term cost savings in travel, exhibitions etc.

For obvious reasons certain market sectors saw huge negative impact, consumer was down 88% but this sector only represents a fraction of our members sales, broadcast was down 45% which is no surprise and the likelihood of this returning any time soon is virtually zero.

Distribution was also badly affected to the extent of a 15% reduction and this had a particularly noticeable impact on member sales.

There were some positives in the market with communications up 29%, probably due to investments to ensure increased demand for broadband width for home working could be supported and medical which was up 86% for obvious reasons. I would expect medical to feature heavily for the foreseeable future.

Value Add, which is a significant portion of members revenues, declined by 19% in 2020 with Fibre Optic down by 41% and Hybrid by 78%. Some of the Hybrid reduction can be attributed to members moving manufacturing elsewhere within their corporation.

For 2021 our members are looking at a possible small negative or flat first half and then potentially a stronger second half and he Government are expected to announce more infrastructure projects and incentives in the  March budget to help economy to recover. Most members are projecting that they will return to 2019 levels by the end of 2022, however, some analysts are predicting a 4 year recovery.

According to the latest data on  UK GDP the economy shrunk by 9.9% in 2020 and our members performance reflected this fairly closely. The ONS forecasts a 5.4% growth in GDP in 2021 which we feel is ambitious. Unemployment has risen to 5.9% and PSNB to £381 billion!!

For 2021 the ONS are forecasting unemployment to continue to rise to 6.7% but PSNB reducing to £202 billion. The huge debt the UK has built up due to the pandemic has to be recovered some how even though the government are talking about high net borrowing for the next decade!!

All things considered it goes without saying that there is a long road ahead for us to come out of this pandemic and for us to see markets recover.

HIS Markit/CIPS report

According to the final Markit/CIPS report of 2020 the UK manufacturing sector had a mixed end to 2020. Orders were positive mainly due to demand being brought forward to beat the BREXIT deadline and some recovery in global markets. There has been some notable impact on port delays and other logistical disruptions resulting in lengthening lead times.

The PMI index rose to 57.5 in December which was a 3 year high, however, this is mainly due to longer lead times and a substantial increase in stocks.

Manufacturing output rose for the seventh consecutive month but job cuts continued to increase for the eleventh consecutive month.

As with our membership there was a surge in orders at the end of last year but this mainly reflected customers bringing forward orders to guard against potential disruption due to the end of the BREXIT transition period.

It was reported that manufacturers experience substantial disruption to supply chains in December. Raw material shortages, port delays, freight capacity issues (air, sea and land) and BREXIT concerns all created the perfect storm.

Input costs rose at the quickest rate in two and half years reflecting shortages, vendor price rises, increased transportation costs, BREXIT uncertainty and exchange rate factors all leading to manufacturers increasing their prices.

Summary

We have just exited a year like no other, however, looking at our members data it seems we may have weathered the initial storm reasonably well. Whilst we have hope on the horizon with the vaccine roll out we are still looking at 2021 being a flat or minimal growth year for the UK interconnect market. A very positive aspect is that members parent companies continue to  plan investments, developments etc and it is really heartening that they seem to be taking this difficult period to look to the future and plan ahead.

We reamin confident that our members and their parent companies will come through this strongly and maybe with a different type of focus on “business” in the future.

As an association we have also weathered the storm, we continued to produce PR articles that have been very well received by the press and has given our association a definite profile lift, we continue to support the umbrella project for RoSH exemptions into the EU, a number of which directly affect connector manufacturers and are currently in the consultation period.

We gained another associate member in the form of ASTEC precision during 2020.

I think we should be pleased with how the association has continued to be promoted and the fact that we remain with a very solid footing for 2021 and beyond.