UK factories ease pain of coronavirus production slump

factory worker

Factory activity has continued to decline this month, but at the slowest pace since March as manufacturing appears to shrug off a surge in coronavirus cases.

Output dropped in ten of the seventeen manufacturing sub-sectors followed in the CBI’s industrial trends survey, with aerospace leading the falls.

October’s monthly order book balance, the difference between factories reporting a rise or a fall in orders, is -34, which compares with -48 last month. It is the best reading since March.

Manufacturing was hit hard in lockdown, but since then it has recovered more quickly than services and construction. It was only 8.5 per cent below its pre-pandemic levels in August, according to the Office for National Statistics. Services was down 9.6 per cent and construction 10.8 per cent.

“Conditions remain tough in manufacturing, with output and orders still down on the quarter, albeit to a lesser degree,” Rain Newton-Smith, the CBI’s chief economist, said. “The government must stay on the front foot when it comes to providing support for the sector and wider economy.”

Tom Crotty, director of Ineos, the chemicals group, said: “While it is welcome to see a slightly rosier picture for manufacturing, there’s no escaping the fact that firms have endured another incredibly difficult quarter. The sector is not out of the woods yet and it will be important for the government to continue to support businesses as we approach the winter.”

The survey of 310 manufacturing firms found that total new orders were broadly flat in the three months to October after their sharp drop in July. Domestic orders picked up slightly, while export orders fell at a slower pace than in the previous quarter.

Headcount in the quarter to October also dropped at a slower pace than in July, which was the fastest decline since April 2009. Business sentiment in the quarter to October was stable. Manufacturers said they were less concerned that access to finance could constrain near-term output or investment plans.

Ms Newton-Smith urged the government to strike a Brexit trade deal to provide much-needed certainty for industry as a third of manufacturers expressed concern that access to materials or components may limit their output over the quarter ahead.

Mr Crotty said: “Manufacturing jobs, businesses and livelihoods are very much at stake and it is essential that leaders find a way through the current impasse and secure a deal.”