Almost half of manufacturers plan 30% job cuts by year-end — FMM-MIER survey

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KUALA LUMPUR (Aug 19): About 42% of respondents from the manufacturing sector in a survey are planning to cut costs by reducing their headcount by as much as 30% come the end of this year, in a bid to keep their businesses afloat during the pandemic-induced slump.

The FMM-MIER Business Conditions Survey also revealed that retrenchments by manufacturers will be likely in 2021, with 42% of the respondents saying they will continue to cut staff count, albeit by a smaller quantum of 10% to 20%.

“Due to new normalcy and standard operating procedures (SOP) to comply with, the manufacturing output has been reduced. Hence, they do not need so much manpower [to keep the business running]. One of the ways to reduce cost is cut down manpower,” FMM president Tan Sri Soh Thian Lai told a press conference here today held to reveal the findings of the FMM-MIER Business Conditions Survey for 1H20.

Soo said most non-essential goods manufacturers were only allowed to resume production activity after movement restrictions were eased. Moreover, not many of them have restored operating capacity to pre-Covid-19 levels, except for rubber glove manufacturers, which he believes are operating at their maximum capacity.

He said many manufacturers are still operating at about half capacity as their output is capped by the subdued demands from export and local markets.

Those most affected are mainly building material manufacturers who supply the construction sector and food manufacturers catering to the hospitality industry.

In terms of business sustainability, 38.9% of the respondents believed that their companies will be able to survive for less than 12 months, with 2.2% already winding down.

Meanwhile, 34% of respondents believed that their companies will be able to sustain their businesses for more than 12 months.

In view of this, Soo said government initiatives such as the wage subsidies and loan moratorium play a vital role in business sustainability.

Amid the uncertainty and gloomy economic backdrop, Soo urged the government to continue to provide cash assistance to businesses, especially micro-enterprises and small and medium enterprises as they are in the most vulnerable group.

As businesses are facing cash flow issues due to the pandemic, Soo urged the government to extend the loan moratorium by another three months until December.

“Based on our view, banks have enough liquidity to support the extension of loan moratorium. Now businesses must be able to survive to keep the unemployment rate low. Bear in mind there are half a million undergraduates in the country likely to face unemployment on top of the current unemployment figure. We are asking banks to further extend the loan [moratorium], to give businesses space to recover their revenue so later they can cover their bank loan facility," he added.

It was reported by the Statistics Department that there are 773,200 people unemployed as at June this year, bringing the unemployment rate to 4.9%. In comparison, in May, the unemployment rate stood at 5.3% or 826,100 people unemployed. 

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