Challenging year ahead for the UK connector industry
It has taken just a little under three months to turn what had the real potential to be a positive 2020 for the UK connector industry into one that has shaken every business to the core. The shutdown in China, for example, has had a significant effect on the supply chain while the dramatic changes in commodity prices will have an obvious impact on materials and manufacturing as well as incoming costs and outgoing prices.
“The result of these and other challenges has meant that ITSA (Interconnect Technology Suppliers Association) members have faced a difficult first quarter,” said ITSA’s Chairman John Biggs. “And there can be no doubt that the UK connector industry has a particularly challenging year ahead.
“In terms of numbers, ITSA members saw revenues drop by 10% compared to the fourth quarter of 2019 but of more significance is that orders dropped by 14% giving a negative book to bill of 0.87:1 which will inevitably lead to lower revenues later in the year. Member’s distribution revenues dropped by 20% and this is likely to follow elsewhere in the market as we progress through 2020.
“We have witnessed dramatic effects on the price of commodities such as Oil, which dropped to the lowest level for 18 years and Gold, where prices have increased by between five and eight percent depending on which quarter we compare it to in 2019. Prices for Silver have fallen by more than 15% since January while Copper has been at a 52-week low.”
According to ITSA, several markets have continued to be buoyant. These include Test & Measurement, Mil/Aero and Medical. Not surprisingly, T&M and Medical have both been positively affected by the technology demands to combat COVID-19 while Mil/Aero is almost certainly due to the need to fulfil existing programmes.
The communications market is clearly being driven by 5G with members seeing 29% growth. The deployment of Fibre into networks continues at pace and ITSA members enjoyed a 45% increase in this product area with Q1 being the highest level for eight years.
COVID-19 - ITSA member’s response
All members of ITSA have naturally had to adjust and adapt to the COVID-19 pandemic with varying degrees of severity according to John Biggs. Some members have had to furlough staff while others have taken the decision to keep their people on board either because of demand or with support from their parent company.
Many members also responded to the challenge and are involved in supporting the medical equipment needs of the NHS. This clearly shows the level of adaptability still apparent in the UK and the present urgent requirement for COVID-19 testing for example brings into sharp focus the need for localised capabilities on into the future.
“The government is predicting that the UK economy could shrink by over five percent but that it would bounce back by Q3 or Q4 2021. This seems somewhat optimistic,” said Biggs
“At the moment, it is common to think about the ‘New Norm’ which will exist after the lockdown starts to be released. This will likely take many forms but for businesses it will be a case of how best to manage their activities in a World where the traditional face to face will not be the ‘Norm’ for many months to come.”