Date: 07/02/2020
Author: HURST
Company: HURST

North west companies are being impacted by the coronavirus outbreak in China, with access to components, finished goods and raw materials impeded, say business advisers at accountancy firm HURST.

If the crisis does not subside, some businesses could be in for a ‘very bumpy ride’, said HURST partner Simon Brownbill.

However, the sad consequences of the outbreak could present some growth opportunities for others, he added.

HURST specialises in advising owner-managed companies across all sectors with annual turnover of £5m-£50m.

Simon said: “In addition to being a global humanitarian crisis, coronavirus is causing much concern among our clients and prospects with supply chains or a significant client base in China.

“Access to components, finished goods, and raw materials is being significantly impeded, at least in the short-term.

“We hope that the outbreak subsides, as the obvious solution of supply chain diversification is a costly and time-consuming process.

“If it doesn’t, business could be in for a very bumpy ride. Many are drawing comparisons with the SARS outbreak of 2003.

“That knocked two full percentage points off China’s economic growth. Seventeen years ago, China’s GDP was just four per cent of the global total.

“That share now stands at 17 per cent, which means the effects of coronavirus could be significantly worse. Furthermore, over that same 17 years, UK imports from China have risen from £11bn to £48bn.

“With such exposure, companies importing from China need to assess their stock levels and vulnerability. Then, they need to prepare their supply chains and logistics processes to handle the possible delays.

“Those who have already built-in resilience to their supply lines need to be working with their alternative suppliers to secure contracts and production capacity, being mindful that these suppliers may be facing exceptional demand.

“However, although the word ‘opportunity’ is hard to stomach in such circumstances, the sad consequences of coronavirus might present some businesses with more positive challenges.

“Those holding large stock levels, for example, might want to look at building relationships with new customers seeking immediate assistance and resilience for the longer term.

“Others who have faced competition from China may also need to gear up substantially to deal with increased demand.”