Manufacturing sentiment deteriorates further amid Brexit uncertainty

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Anna Leach of the CBI

Manufacturing new orders flattened in the quarter to January and sentiment about both the business situation and export prospects tumbled, according to the latest quarterly CBI Industrial Trends Survey.

The survey of 326 manufacturing firms showed that output grew at a pace above the long-run average in the three months to January, a little slower than in the three months to December. Manufacturers expect volumes to continue growing at a similar pace over the next three months.

New domestic orders were unchanged over the past three months, stabilising from a fall in the previous quarter, which was the first decline in three years. While new export orders picked up following a fall in the three months to October, growth was weak and well below the highs seen in mid-2018. Overall order books remained strong, with export order books particularly robust.

Meanwhile, business optimism in the quarter to January fell sharply with sentiment regarding export prospects dropping at the fastest pace since the financial crisis. And manufacturers’ concerns that political and economic conditions abroad were likely to limit their future ability to obtain export orders were at their highest level since the immediate aftermath of the EU Referendum.

Investment intentions for the coming year remained notably below their long-term averages, with spending on buildings, plant & machinery, training and innovation all expected to be lower in the year ahead.

Stocks of raw materials in the three months to January grew at a similarly strong pace to October, while stocks of works in progress and finished goods were flat.

Anna Leach, CBI Head of Economic Intelligence, said: “The manufacturing sector is clearly feeling the pinch of Brexit uncertainty, with worsening business sentiment coinciding with an ongoing reluctance to invest in new facilities, machinery, innovation and training. Notwithstanding continued growth in output, these underwhelming figures in part reflect businesses’ continuing desire for clarity.

“With uncertainty risking paralysis among manufacturers, it is vital for politicians to compromise and break the Brexit deadlock, paving the way for UK manufacturers to continue trading in global markets with minimal disruption.”

Tom Crotty, Group Director of INEOS and Chair of CBI Manufacturing Council, said: “The last quarter has been a challenging one for manufacturers, who are understandably bracing themselves for the frightening prospect of a ‘no deal’ Brexit. Uncertainty has sadly become the norm, and this is holding back growth and investment in the manufacturing sector.

“It is vital that the Government finds a positive solution to the current Brexit deadlock so firms can continue to compete both at home and abroad.”