An updated version of this report was published in October 2020.
This report offers a preliminary review of international policy responses aimed at mitigating the potential impacts of COVID-19 on manufacturing. The review covers a selection of 11 countries (plus the European Union), which are at different stages of their response to the COVID-19 epidemic.
The report should be seen as a snapshot of the current international policy landscape, which is however likely to change rapidly as governments implement new measures.
Aims of the review
At the request of the Department for Business, Energy and Industrial Strategy (BEIS), inform UK policy responses aimed at addressing the adverse impacts of COVID-19 on manufacturing by:
- Reviewing emerging international policy approaches in selected countries to supporting manufacturing supply chains and the workforce following the global COVID-19 outbreak.
- Characterising the main focus areas identified by national governments, including the mobilisation of the manufacturing base to provide critical supplies, workforce retention, and emergency financial support.
- Providing insights into practical implementation mechanisms.
Countries reviewed: Australia, China, France, Germany, India, Italy, Japan, Korea, New Zealand, Singapore, United States, European Union
Three focus areas
Three key focus areas were identified in manufacturing policy responses of the countries reviewed.
1. Ensuring continuing operation of manufacturing businesses
- Financial and fiscal support (loans, guarantees, subsidies, insurance, tax breaks, etc.)
- Cash flow to help firm survival
- Workforce retention and wage payments
- Ensuring continuing supply of production inputs / addressing supply chain disruptions
- Designation of critical workers and sectors
2. Mobilising manufacturing towards critical supplies
- Repurposing manufacturing towards critical supplies
- Industrial consortia to produce critical supplies
- Designation of critical medical supplies
- Relaxation of regulations
- Export controls and import facilitation
- Direct government involvement in production and distribution
3. Supporting post-crisis manufacturing growth
- Guidance for business resumption, including workers’ health and safety
- Support to identify future markets and sale channels
- Initiatives aimed at increasing manufacturing productivity
‘Open wallet’ approach: Across the countries reviewed, significant levels of public expenditure have been announced. This includes emergency budgets such as those announced in the US (US$2trn), Germany (€822bn), Korea (~£14bn), Japan (~£12bn) and Australia (~£8.8bn). These funds are intended for the whole economy, particularly the health sector, as well as firms and households. While it is difficult to identify manufacturing-specific investments, these funds are expected to benefit manufacturing firms.
Different levels of government intervention in manufacturing: Despite the large-scale interventions in national economies across the world, significant differences are observed in terms of the level of direct government involvement, specifically in the manufacturing sector. While countries such as Germany have so far favoured mechanisms such as voluntary business consortia, China has actively participated in the production of critical supplies through its state-owned enterprises; and the US has invoked the Defense Production Act, which gives the government powers to require businesses to accept and prioritise government contracts. China has also reduced the cost of electricity, which has directly benefited manufacturers. Most countries reviewed have established emergency public procurement programmes and direct dialogue mechanisms with manufacturers.
Lessons from previous crises: Some countries have applied lessons from previous crises in terms of, for example, financial support delivery and information provision. Discussions in the US Congress have emphasised the need to protect workers, families and the self-employed, not just firms. There is also interest in avoiding a public opinion backlash (e.g. by ensuring that firms cannot buy back stock or issue bonuses while they receive taxpayer support). Meanwhile, Australia has leveraged information services previously developed in response to the wildfires that affected the country in the last few months.
Increased flexibility of existing delivery mechanisms: In order to ensure that support is timely and scalable, most of the countries reviewed have leveraged existing programmes and delivery mechanisms, often assigning them additional funds. This has included: the relaxation of rules in existing programmes (e.g. to expand the number of SMEs eligible for financial and fiscal support); repurposing of existing programmes (e.g. incubation programmes directed to technologies related to the epidemics); and fast- tracking applications and reducing red tape (e.g. through the use of online applications).
New experiments: In order to address supply shortages, particularly in medical supplies and protective equipment, some countries have employed less traditional instruments. These include the provision of incentives for manufacturing firms to repurpose existing capabilities in Japan and China. These countries have also provided support to the development of new technologies and business models that reduce the risk of infection among manufacturing workers (e.g. contactless delivery using drones, increased used of cloud computing, and teleworking).
Limited international co-operation and co-ordination: Cross-country efforts to coordinate the large-scale production and distribution of critical supplies were not apparent during our review. While examples of bilateral cooperation have been identified, regional and international initiatives have not been widely reported. On the contrary, a number of protectionist measures such as the prohibition of exports have been implemented.
Mapping global and national manufacturing supply chains: Unsurprisingly, there is increasing interest in understanding the critical supply chains of raw materials, key suppliers and transportation routes of critical products. This includes efforts to map global centres of production, as well as national manufacturing supply chains that are critical to ensuring the continuing provision of basic supplies as large swathes of the population go into lockdown.
Emerging role of public research and technology organisations (RTOs) and national centres of excellence: As countries attempt to leverage their existing manufacturing bases to address supply shortages effectively, safely and with the quality required, the coordination challenges involved have become readily apparent. In the UK, the High Value Manufacturing Catapult, a public research and technology organisation (RTO), has had a leading role in coordinating responses from the manufacturing community to the prime minister’s “ventilator challenge”, aimed at increasing the supply of ventilators and ventilator components. Meanwhile, the National Additive Manufacturing Innovation Institute in the US has created an online repository gathering the needs of health-care providers, 3D-printing capabilities and digital designs.
Read the full executive summary for more specific observations in each of the focus areas, as well as a country-by-country breakdown of policy responses.