UK manufacturers have sunny outlook

The sun looks to be shining on the manufacturing sector in the UK.The sun looks to be shining on the manufacturing sector in the UK.

With the fall in the Pound as resulting from the Brexit vote subsequently boosting British manufacturers’ export prospects, this sector now looks to have something else to smile about.

UK-based catering equipment manufacturers can number themselves in those being more optimistic about their business situation and exporting prospects, while reporting strong growth in domestic orders over the previous quarter, according to the latest quarterly CBI Industrial Trends Survey.

The survey of 461 manufacturers reveals that the volume of domestic orders rose at the fastest pace since July 2014 in the 3 months to January, while export orders continued to grow, but below expectations.

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Demand is expected to grow strongly over the second quarter, driven by both domestic and export orders, while production is also expected to advance briskly – expectations for output growth are also the highest since July 2014.

Concerns persist over access to skilled labour, however, with almost a quarter of respondents – the highest since July 1989 – observing that skilled labour availability could limit output over the next few months.

Sterling’s depreciation continues to impact prices as unit costs rose at their highest pace in over 5 years, amid expectations that this will intensify over the next quarter. But on the flip side, manufacturers continue to see the competitive benefits arising from Sterling’s weakness, reporting a further strong rise in competitiveness within the EU and putting the rise in competitiveness in non-EU markets at a survey high.

The pick-up in output has meanwhile eaten into spare capacity, pushing the proportion of firms citing capacity expansion as an investment driver to a survey high. Firms are planning to increase investment in product and process innovation and training and retraining over the year ahead at the fastest pace in 2 years, while investment plans for building and plant and machinery have moved back above their long-run averages.

CBI chief economist Rain Newton-Smith, said: “UK manufacturers are firing on all cylinders right now with domestic orders up and optimism rising at the fastest pace in 2 years.

“The weaker Pound is driving export optimism for the year ahead, but is having a detrimental impact on costs for firms and ultimately for consumers. The new Industrial Strategy can support our manufacturing base by offering a shared long-term vision for the key sectors and regions of the economy and evidence-based plans for government and business collaboration. The CBI and its members across the country stand ready to support the Government in achieving this.”

Key findings

•    Domestic orders rose at their fastest pace (+16%) since July 2014 (+23%). Export orders rose more moderately (+5%), and below expectations (+17%)

•    37% of businesses reported an increase in total orders, and 21% a decrease

•    32% of firms said the volume of output over the past 3 months was up and 18% said it was down, giving a balance of +15%

•    22% of manufacturers said employment numbers were up, and 18% said they were down, giving a balance of +4%

•    27% of firms said they were more optimistic about the general business situation than three months ago and 12% were less optimistic, giving a rounded balance of +15%  – the highest since January 2015 (+15%). Optimism about export prospects for the year ahead rose strongly (+19%)

•     Firms competitiveness in the EU rose strongly again (+28%) while their competitiveness in non-EU markets rose at the fastest pace in the survey’s history (+26%)

Authors

One Comment;

  1. Paul Bowers said:

    Remember when the British used to be renown for having a stiff upper lip rather than a quivering lower one?
    The country made a decision about whether we wanted to be an independent nation and we need to get on with maximising the real opportunities for UK manufacturers; rather than whingeing about potential problems in the future.
    Now if only we could get the government to encourage the Public Sector to Buy British wherever possible, rather buy imported products that are probably more expensive than the home grown equivalent…

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