UK life sciences leads the Covid-19 fight

6 min read

Life Sciences

This is the first weekly update from Santander’s life sciences team on how the Covid-19 pandemic is affecting our clients and the sector as a whole.

Life sciences

Santander is working closely with customers and partners from across life sciences as the UK’s globally admired industry helps lead the fight against the Covid-19 pandemic.

In recent days, we’ve hosted a webinar featuring Peter Ellington, Chief Executive of the Association of British HealthTech Industries, and Tony Jones, CEO of One Nucleus, which was full of crucial insight on R&D, manufacturing, the industry supply chain and international trade. We’ve also been talking to businesses that want to play their part in sourcing testing kits, instruments, personal protective equipment (PPE) and other vital supplies in the Covid-19 battle. The government is requesting that approaches with offers of such help are made here, and our life sciences head, Phil Jennings, would delighted to hear about what customers and others can do.

Already, the UK’s life sciences expertise is proving to be invaluable in responding to this pandemic. For example, a newly-developed rapid diagnostic test for Covid-19 is already being deployed in Cambridge hospitals. The test was developed by Diagnostics for the Real World, a business spun out of the University of Cambridge, and can provide results within 90 minutes. The philanthropist Sir Chris Hohn has paid for the first 100 units, ahead of a nationwide roll-out – and there is clearly huge potential in international markets too once UK demand has been met.

The challenge for the sector is to develop robust testing that can be ramped up to scale at speed. On antigen tests, for example, the unprecedented global demand means there is a balance to strike between rapidity and ensuring testing can be delivered reliably. The private sector is already offering up laboratories and testing equipment to supplement capacity in the NHS and at Public Health England, with options for additional testing facilities being explored urgently.

There will be new collaborations and ideas emerging on an ongoing basis. For example, we have already seen Royal Mail moving into the production of medical visors, with the first batch already in use at the Royal Glamorgan Hospital.

At the same time, as in other industries, the pandemic will also cause specific problems for life sciences companies. Three leading industry trade bodies are collecting insights here as they explore options for supporting businesses through these problems. One initiative is a survey that will help the Greater London Authority, national government and other organisations develop solutions to help life sciences businesses through the crisis and beyond.

Some help is already available. For example, the government has waived import duties and VAT on key medical supplies, equipment and protective garments. More details are available here.

Finally, it’s important that the life sciences sector keeps one eye on the future. For example, one point made by Peter Ellingworth in our recent seminar is that much elective surgery has been cancelled in many countries as the focus shifts to coping with Covid-19. As the pandemic eases, demand for products such as knee implants, cataract surgeries and so on, is set to soar as these procedures are rescheduled. In some cases, notably for orthopaedic implants, manufacturing currently takes place on a just-in-time basis, but production may need to be increased quickly to accommodate significantly higher demand in a few months’ time.

 

Manufacturing data begins to tumble

More broadly, the effects of the pandemic on manufacturing are now beginning to show up in sector data. The IHS/Markit Purchasing Managers Index, based on a survey of business leaders in the sector, fell to 47.8 in March, a three-month low and down from 51.7 in February. Any reading below 50 indicates a majority of respondents have experienced a contraction in activity.

Given that the UK government’s response to Covid-19 did not accelerate until the second half of the month, with the Prime Minister introducing lockdown measures on 23 March, April’s figures are likely to be significantly worse. Manufacturers across the UK are now focused on liquidity and very careful cash flow management. Several listed engineering companies have now announced they are cancelling planned dividends in order to conserve cash and we expect more to follow this example.

The experience of manufacturers in the UK mirrors that of their counterparts in other parts of the world. Factory activity contracted across most of Asia in March as the pandemic paralysed supply chains. Significant falls in activity in Japan and South Korea overshadowed a modest improvement in China where authorities have felt able to relax some of the restrictions as Covid-19 cases have slowed. With the number of countries around the world imposing their own lockdown regimes, we now expect the impact of the pandemic on global supply chains to be more enduring than many originally expected.

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