Sector report
the vaccine, at least within commercial environments, 2021 appears to promise another strong performance.
Packaging
2020 was a highly disruptive year for this normally stable sector. Covid-19 saw a significant impact on food-to-go sales, although when cafés were open the recent rise in reusable cups went into reverse. Greater focus on hygiene has presented many opportunities for manufacturers, however, and slowed moves to reduce packaging content (albeit only temporarily). Positive trends include the growth in grocery sales and the growth in ecommerce, with consumers very focused on the condition and shelf-life of what they buy and on-packet branding becoming even more important to the relationship with the end customer.
Building products
The recent Brexit deal has given builders much more clarity on the cost and availability of imported materials such as timber and roofing materials. Loss of skilled labor with the exit from the EU and ongoing delays at UK ports will continue to cause some frustration, but UK housebuilders held up far better than initially expected through 2020. Construction is widely recognized as one of the major industries to contribute towards rebuilding the economy. Indeed, according to recent construction PMI data, only ten per cent of companies in the sector felt it would contract in 2021, versus 50 per cent believing it would grow.
Overall
There are also several other manufacturing sectors, such as capital goods that are set to return from a more difficult year, with deferred business investment from 2020 deployed over the next couple of periods. It will take longer for Automotive and Aerospace to recover, but in the longer-term, population growth, the reopening of the travel sector and legislation-related advances in automotive technology should all contribute to the overall outlook beyond 2021. The FTSE 350 Industrials index is currently 40 per cent above its March 2020 low, while PMI data reflects confidence within the sector. 2021 will be a vintage year for manufacturing investment both within businesses and through M&A. v
Graham Carberry Graham Carberry is Managing Director at Arrowpoint Advisory, the dedicated lower midmarket team of Rothschild & Co in the UK. We provide expert M&A, Debt and Special Situations advice to publicly-listed, private and family companies, entrepreneurs, sponsor-backed businesses and management teams, investors and lenders. arrowpointadvisory.com
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