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UK consumers set to feel impact of coronavirus outbreak on supply chain

By Henry Saker-Clark, PA City Reporter

Companies in the UK and across the globe have warned that the outbreak of coronavirus in China could significantly impact their supply chains and stop products reaching consumers.

UK consumers could be impacted as the virus halts factory production, forces retail closures and causes airlines to suspend flights.

City analysts have said key sectors such as technology, car production and retail could be put under pressure in the coming months if the outbreak does not rapidly dissipate.

– Tech

The extended suspension of production for major technology component suppliers in China has resulted in uncertainty for some of the world’s biggest firms.

Apple, which has suppliers in Wuhan, the city at the epicentre of the crisis, said some of its supplier factories have said they plan to reopen on February 10, instead of the end of January.

The timing of the outbreak coincided with the Chinese New Year holiday period, meaning suppliers were already due to be closed for a period, but the extension of the closed period will start to unsettle firms and investors.

Google owner Alphabet and Samsung Electronics have also said that some factories and suppliers will see extended closures on the back of guidance by the Chinese government.

(PA Graphics)

– Retail

Some UK retailers continue to rely heavily on Chinese suppliers and could still face an impact, even though the majority of UK-bound products have already been shipped.

Analysts at Peel Hunt said clothing retailer Joules is particularly exposed to coronavirus disruption as it sources most of its products from China.

Meanwhile, Ted Baker supplies around half of its products from China, although analysts John Stevenson and Jonathan Pritchard said they “believe any material short-term impact should be classed as one-off”.

Halfords and discount group B&M could also be impacted as they both import around 40% of their products from China, Peel Hunt said.

(PA Graphics)

– Car production

The current two-week production shutdown on the Chinese province of Hubei could impact have a major impact on the country’s auto production industry, according to S&P Global Ratings.

Analysts said the shutdown is set to “knock 2% to 4% off total annual production” for the region, which is home to 9% of China’s auto industry.

Volkswagen is the car manufacturer with the highest exposure to China, manufacturing vehicles and components across 23 sites in the country.

Video Games

Another sector which could be particularly impacted if the coronavirus shutdown is prolonged is the video games sector, with between 30% and 50% of art creation for western games based in China.

Analysts at Jefferies said that “if shutdowns exceed a month or so, game schedules will be delayed” while new consoles could also face supply issues if coronavirus continues to cripple the country.

They said that security requirements and software tools will “largely prevent remote working”, meaning extended quarantine rules would hamper new releases.

It added that mobile games, as well as PC and console games, are often outsourced to Chinese firms, meaning these could also be impacted.