A new report released by Barclays Corporate Banking reveals that goods with a total value of £23.6bn are awaiting completion in UK manufacturers' warehouses because of supply chain delays.

The study - 'Chain reaction' - focuses on manufacturing businesses with over ten employees and looks at the impact of supply chain issues.

Barclays' research shows that over seven in ten (72 per cent) businesses are currently holding items in their warehouses awaiting completion because raw materials, ingredients or component parts have not yet been delivered from suppliers. On average, this 'unfinished business' is worth more than £1m to each company impacted.

Products in the steel and metals sector are most severely affected, with £9bn worth of goods incomplete - equivalent to almost a fifth (19 per cent) of the sub-sector's annual turnover.

The most affected consumer goods sector is food and drink, with delays in sourcing ingredients causing a £3bn backlog. A high value of plastic products (£2.6bn) and electronics (£2bn) are also awaiting completion.

The trends are reflective of supply chain disruption that has challenged the manufacturing sector since the pandemic and three in five (59 per cent) firms say they are still facing supply issues. This has been exacerbated by the invasion of Ukraine and the aftermath of the UK's exit from the EU.

Customer relationships are now being impacted: two thirds (65 per cent) of manufacturers say their customers are having to wait longer for products, with 15 per cent describing the hold-ups as 'significant'. To offset rising costs such as energy and transportation, over half (55 per cent) of manufacturers are planning price increases for their own products, of 37 per cent on average.

The industry is said to be innovating to solve these challenges. Most commonly, businesses are increasing their storage capacity (39 per cent) to prepare for the fact raw materials are taking longer to source. Meanwhile, a third (33 per cent) are "near shoring" to move their supply chains closer to home and 32 per cent have "friend shored" to work with suppliers in countries that have a strong trading relationship with the UK. To spread their bets, 37 per cent of manufacturers have increased the number of different suppliers they work with.

To maintain cashflow and liquidity, over two fifths (42 per cent) of manufacturing firms are optimising their working capital cycles and the same amount are accessing additional bank funding. 38 per cent are seeking a cash injection from private equity and a third (32 per cent) are selling off assets to raise funds.

Such measures are leaving the industry confident in the medium-term. Two thirds (66 per cent) of companies think supply chain challenges will improve over the next six months and 86 per cent are confident about growth next year.

Businesses have also doubled down on their commitment to sustainability despite supply chain pressures. Almost two thirds (64 per cent) of manufacturers say carbon reduction has become an even bigger priority in the past six months, despite nearly three quarters (73 per cent) saying their environmental goals have become less attainable.

Amidst the business optimism, however, Barclays' report also lays bare the threat that rising costs and supply chain disruption could pose long-term if circumstances do not improve.

On average, UK manufacturers only expect to be able to sustain their operations for 15 further months if current conditions continue.

Lee Collinson, head of manufacturing, transport and logistics for Barclays Corporate Banking, said: "The British manufacturing sector has faced a perfect storm of challenges this year, with rising costs, the war in Ukraine, labour shortages and ongoing Covid lockdowns in China hitting supply chains hard. As a result, billions of pounds worth of goods are trapped in warehouses unfinished, and this may hit industry turnover in the early part of next year.

"However, manufacturing firms have done what they do best and engineered new solutions to limit the impact of the issues they face. As a result, many businesses will enter the new year with a degree of cautious optimism and confidence."