Wednesday, July 28, 2021

Manufacturing activity continues to weaken

Manufacturing output growth in the quarter to March was at its weakest since May 2018, according to the latest monthly CBI Industrial Trends Survey.

The survey of 358 manufacturers found that total order books softened slightly on the previous month, while remaining above their long-run average. Export order books strengthened from February and remain historically elevated.

Output volumes growth weakened marginally in the three months to March, falling in line with the long-run average. However, this month’s pace of growth was weak by comparison with the strong output growth rates seen over 2017-18.

Output volumes expanded in 11 out of 17 sub-sectors, with growth driven predominantly by the food, drink, & tobacco, chemicals, and metal manufacture sub-sectors. Meanwhile, the mechanical engineering, paper, printing & media, and motor vehicles & transport equipment sub-sectors were the main drags on growth. Looking ahead, firms anticipate output volumes to grow at a broadly similar pace in the next three months.

Manufacturers reported that stock adequacy remained broadly in line with the long-run average. Meanwhile, expectations for price inflation in the next three months eased noticeably to their slowest pace since September 2016.

An extra question included in this survey asked manufacturers how Brexit uncertainty was affecting their activity. A quarter of respondents reported stockbuilding, with others mentioning depressed investment and demand due to uncertainty, and the difficulty in obtaining export orders.

Anna Leach, CBI Head of Economic Intelligence, said: “The manufacturing sector has slowed again this month and is now barely growing. Brexit uncertainty is one of the biggest threats to growth in the UK manufacturing sector – both current and future – as firms prioritise stockpiling goods over investing in the future of their business.

“It is essential that politicians eliminate the threat of a “no deal” Brexit in order to alleviate manufacturers’ fears of border delays, ruptured supply chains and tariffs on exports to the EU.”

Tom Crotty, Group Director of INEOS and Chair of CBI Manufacturing Council, said: “Manufacturers are in despair at the unacceptable failure of politicians to end the Brexit impasse. Every day that goes by without a resolution results in more businesses putting off investment and stockpiling goods in order to soften the blow from a potentially disastrous “no deal” Brexit scenario.

“It is crucial that Brexit uncertainty is lifted as a matter of urgency. Only then can manufacturers begin to move forward and shift our attention on to resolving the long-term challenges facing the sector – such as solving our skills challenge and raising productivity.”

UK manufacturers continue to be supported by the lower level of sterling. However, the recent slowing in global economic momentum means that there will be less support for the UK manufacturing sector from external demand. All in all, though, the continued threat of a no-deal Brexit poses the biggest risk to the outlook for UK manufacturers.

Key findings:

  • 27% of manufacturers reported total order books to be above normal, and 26% said they were below normal, giving a balance of +1% (from +6% in February). This was still comfortably above the long-run average (-13%)
  • 28% of firms said their export order books were above normal, and 20% said they were below normal, giving a balance of +8% – above the long-run average of -17% and stronger than February (+1%)
  • 30% of businesses said the volume of output over the past three months was up, and 26% said it was down, giving a balance of +4%. This rate of growth was down a little on February (+7%) and in line with the long-run average (+4%), but was, nevertheless, the weakest rate of growth reported since May 2018 (+3%)
  • Manufacturers expect output to grow at a somewhat faster pace in the coming quarter, with 29% predicting growth, and 22% a decline, giving a rounded balance of +7%
  • Expectations for growth in average selling prices for the coming three months (+7%) were at their slowest since September 2016, but still slightly quicker than the long-run average (+3%)
  • 21% of firms said their present stocks of finished goods were more than adequate, whilst 10% said they were less than adequate, giving a balance of 11% – roughly in line with the long-run average (+13%).

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemichaving a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £31.50 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.

Latest news

Related news

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.