UK manufacturing orderbooks set for recovery

The UK’s manufacturing industry has a positive outlook.

UK manufacturing orderbooks recovered and the volume of output increased strongly in the 3 months to June, according to the latest monthly CBI Industrial Trends Survey.

According to the survey of 388 manufacturers, output grew at the fastest pace since December 2017 in the 3 months to June, broadly in line with expectations. Growth was broad-based, with output growing in 14 out of 17 sub-sectors, with growth mostly driven by ‘food, drink and tobacco’, and ‘mechanical engineering’. Respondents anticipated that output growth will slow slightly over the next 3 months.

Total orderbooks returned to the healthier levels recorded at the end of 2017, with 33% of manufacturers reporting them to be above normal and 20% saying they were below normal.

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Export orders remained stable and well above average, in line with the past 16 months. 20% of firms said these figures were above normal and 11% said they were below a normal rate.

Elsewhere, 43% of businesses said the volume of output over the past 3 months was up, and 13% said it was down. Plus manufacturers expect output growth to slow slightly in the coming quarter, with 30% predicting volumes to increase, and 12% expecting a decline.

Expectations for output price inflation softened to the weakest in almost a year, while stocks levels moved back below the long-run average. This was demonstrated in 16% of companies expecting average selling prices to increase in the coming 3 months, with 3% predicting a reduction.

While the CBI expects manufacturers to continue to benefit from robust external demand and the lower exchange rate, overall economic growth is expected to remain subdued due to weak consumer income growth and investment being held back by ongoing uncertainty.

Anna Leach, CBI head of economic intelligence, said: “The recovery in orders and a return to bumper growth in production suggests the lull in manufacturing activity may be over. While risks to demand persist from Brexit and escalating global trade tensions, firms can work with the government to nurture a pro-enterprise environment that helps UK growth to shift up a gear.

“There is much within the UK’s control that can be acted on now to lift UK productivity, from building a third runway at Heathrow to investing in the skills of the future.”

Tom Crotty, chair of the CBI manufacturing council, added: “Improvements in orderbooks and strong output growth are good news for UK manufacturers, particularly after the slowdown that we had seen since the beginning of the year.

“But uncertainty remains elevated, from both Brexit and anti-global trade rhetoric. It is becoming increasingly important for the government to provide more clarity to UK businesses so that they can better compete at home and globally.”

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