UK manufacturing output starts to fall after strong period growth


Manufacturers’ output volumes growth slowed following a robust showing in the previous month, according to the latest CBI Industrial Trends Survey.

The survey, of 409 firms, revealed that output growth slowed in the three months to September, but remained above the long-term average. 

Output expanded in 10 out of 17 sub-sectors, with growth driven predominantly by the mechanical engineering, food, drink & tobacco, plastic products, and metal products sectors. Manufacturers expect output growth to pick up over the next three months.

Meanwhile, total order books weakened slightly again but remained well above the long-run average. Export order books also faded a little to their weakest in almost a year, but likewise remained well above the long run average. 

Expectations for output price inflation remained firmly above the long-run average, while stocks of finished goods remained adequate but below the long-run average.

We expect UK manufacturers to continue benefitting from healthy external demand and a lower sterling exchange rate, but overall economic growth is expected to remain subdued, reflecting weak household income growth and the drag on investment from Brexit uncertainty. For more detail, see our June economic forecast.

Anna Leach, CBI Head of Economic Intelligence, said: “While manufacturing order books remain strong and output is still growing, Brexit uncertainty continues to cloud the outlook. Heightened fears of a ‘no deal’ Brexit scenario have prompted some firms to move publicly from contingency planning to action. 

“Efforts on all sides must be geared towards securing the Withdrawal Agreement and – crucially – the transition period. This will provide temporary but essential relief for businesses of all sizes and sectors. 

“Looking ahead to the Autumn Budget, business rate reform, coupled with movement on capital allowances, could help encourage productive investment against this uncertain backdrop.”

Tom Crotty, Group Director, INEOS, and Chair of the CBI Manufacturing Council, said:  “Robust output volumes and order books are good news for British manufacturers, who have benefitted from a healthy global economy and lower sterling exchange rate. However, the continued uncertainty surrounding the final six months of Brexit negotiations presents a real risk to the continuation of this strong momentum.

“In the coming months, manufacturers will be looking to the Government to protect the frictionless trade with the EU that they need to thrive. And it is important that measures to bolster competitiveness domestically – such as getting the Apprenticeship Levy fit for purpose – aren’t overlooked.”