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Chemicals sector primed to support testing programme

21st Apr 2020 5 min read

This is the latest weekly update from Santander’s chemicals team on how the coronavirus pandemic is affecting our clients and the sector as a whole.


Santander is working closely with clients and colleagues across the chemicals sector as it responds to the coronavirus pandemic. One of the key issues in the sector in recent weeks has been the availability of the substances needed to support the testing of key workers and suspected virus carriers.

Ahead of the Easter break, the Chemical Industries Association (CIA), one of our key partners, made it clear that its members were ready and willing to offer whatever support the government needs. To make sure the supply of the reagents and other chemicals required to meet its goal of as many as 100,000 tests a day by the end of April.

A CIA spokesman said: “While there is of course an escalating demand, there are reagents being manufactured and delivered to the NHS. Every business here in the UK and globally is looking at what they can do to help meet the demand as a matter of urgency.” The spokesman added that all relevant sectors in the UK were currently working with the government to clarify exactly what the NHS’s requirements are, and to meet them.

The CIA is currently collaborating with members on a number of new challenges, such as:

  • Redesigning working practices in response to the new coronavirus risks, carrying out risk assessments and introducing temperature screening or compulsory mask-wearing.
  • Maintaining supply chain oversight, and communicating with both suppliers and customers in relation to delays of potential manufacturing issues further down the line. The importance of carrying out risk assessments for supply chains has also come to the fore.
  • What steps the government may need to take in terms of relaxing competition regulations to allow delivery companies to work together to overcome supply issues.


Spotlight set to fall on OEMs

We expect to see an increasing focus in the weeks ahead on the issues facing the global supply chain for original equipment manufacturers (OEMs) across all sectors. Major OEMs themselves are generally well positioned to survive the pandemic thanks to factors such as geographical diversification and solid levels of capitalisation. The same may not be the case for many of the smaller businesses that make up their supply bases.

Looking back to the financial crisis, it is estimated the total number of global suppliers fell by as much as 20% in the recession that followed. There are increasing concerns today that the distance many OEMs have put between themselves and their supply chains may work to their disadvantage when they come to ramp production back up as the coronavirus crisis begins to subside.

As such, OEMs may decide to use the current downturn as an opportunity to analyse their supply chains. This will enable them to prioritise the throughflow of the parts and raw materials most critical for revenue generation, rather than simply taking steps to support the suppliers where they spend the most money. As well as helping production get back up to speed more quickly, this approach also has the potential to resolve longer-term sustainability issues.


Manufacturers welcome government support

The measures put in place by the Chancellor of the Exchequer, Rishi Sunak, to support businesses affected by the coronavirus crisis have been largely welcomed by manufacturers’ organisation MakeUK. Ahead of the Easter break, Sunak revealed that £90bn of business interruption loans have now been approved, supporting almost 1,000 firms. A further £1.9bn has been provided in the form of corporate finance.