MANUFACTURERS need to take action over the supply problems that are likely to spread as a result of the coronavirus, a lawyer has warned.

Businesses in a host of sectors have sounded the alarm over the impact of the virus on supplies from China.

Apple warned this week that it would not meet its financial guidance for the second quarter because production of iPhones had been hit by the outbreak.

IT giant Aveva, recruiter Hays and kitchen and bathroom supplier Norcros have also said they could be hit by the impact on the Chinese market.

Peter Taylor, managing partner at law firm Paris Smith in Southampton, said: “Businesses are now facing significant disruption to their supply chains as so many component parts are manufactured and shipped to the UK for use in the production of products in many sectors.

“The chairman of a domestic appliance manufacturer based in the south of England has been advised that production of key elements for his company’s products is likely to be delayed for weeks as the factories in which they are made are currently closed.

“Shipping from Chinese ports is similarly disrupted, as travel to and from the ports is more restricted as the authorities in China seek to get on top of the virus. The availability of flights is reducing with the consequential hike in the price of airfreight as importers in other countries seek desperately to find other means to maintain the continuity of supply for key parts to their manufacturing process.

“Wuhan, at the centre of the virus, plays a vital role in the manufacture of automotive parts. A number of motor manufacturers, including Fiat, Hyundai and Toyota, have already been experiencing supply issues. Others will undoubtedly follow. Germany, whose economy is heavily dependent on the strength of its motor industry, will be closely monitoring developments.”

He issued several tips to manufacturers using Chinese factories in the supply chain:

  • Get clarity, from the Chinese manufacturer or another reliable source, about continuity of supply.
  • Manage customers’ expectations by explaining and clarifying the position to them.
  • Review supply and sales contracts. They might make reference to disease, epidemic or quarantine, or to “acts of God”, “acts of government” or “circumstances beyond the parties’ control”.
  • See what contracts say about exclusivity of supply – and whether you are entitled to seek parts from other sources and in what circumstances.
  • Check your insurance policies to see whether you have business interruption insurance and whether it will cover the disruption caused by the virus. “The wording of business interruption clauses is rarely clear cut and is often open for argument,” said Mr Taylor. “If this is the case, it’s worth investing in professional advice to assist in the presentation of one’s claim to insurers, particularly when large sums or the future of the business are at stake.”