Manufacturing output growth in the UK slowed in the quarter to February 2019, while order books improved slightly, according to the latest monthly Industrial Trends Survey by the Confederation of British Industry (CBI).
The survey of 366 manufacturers found that both total and export order books strengthened modestly on the previous month, while remaining comfortably above their respective long-run averages.
Output volume growth slowed in the three months to February to a pace roughly in line with its long-run average. Output expanded in over half (9 out of 17) of the subsectors, with growth largely driven by the chemicals and the food, drink and tobacco subsectors. Meanwhile, the motor vehicles and transport equipment and mechanical engineering subsectors were the main drags on growth. Looking ahead, firms expect output volumes to grow at a broadly similar pace over the next quarter.
Manufacturers reported that stock adequacy picked up, but remained broadly in line with the long-run average. Meanwhile, expectations for price inflation in the next three months sped up to their quickest pace in a year.
UK manufacturers continue to be supported by the lower level of sterling, although weaker global economic momentum means less support for export orders from that front. But the continued threat of a no-deal Brexit poses the biggest risk to the outlook for UK manufacturers.
“Clock is ticking quickly towards crisis point”
Anna Leach, CBI Head of Economic Intelligence, said: “UK manufacturing activity has moderated at the same time as headwinds from Brexit uncertainty and a weaker global trading environment have grown.
“The time for Brexit compromise to support the UK manufacturing industry is now. The clock is ticking quickly towards crisis point. It is of critical importance that politicians of all stripes and on both sides of the channel come to agreement on the terms of a Brexit deal as soon as possible, to allow our manufacturers to continue to create, make and trade their goods with certainty.”
Tom Crotty, Group Director of INEOS and Chair of CBI Manufacturing Council, said: “Manufacturers have proved highly resilient in the difficult circumstances they find themselves in. However, it is without doubt that Brexit uncertainty has been a millstone on growth and investment in the sector.
“We are now just weeks away from the very real prospect of a ‘no deal’ Brexit, which would be hugely damaging to manufacturers up and down the country. The political paralysis on Brexit must urgently give way to compromise and an acceptable deal being struck.”
Key findings from the survey
- 24% of manufacturers reported total order books to be above normal, and 19% said they were below normal, giving a rounded balance of +6%. This was comfortably above the long-run average (-13%) and a modest improvement on January (-1%).
- 20% of firms said their export order books were above normal, and 19% said they were below normal, giving a balance of +1%. This was above the long-run average of -17% and slightly stronger than January (-5%).
- 27% of businesses said the volume of output over the past three months was up and 20% said it was down, giving a balance of +7%. This was a slower pace than the one reported in January (+16%), and the weakest rate of growth since May 2018 (+3%) – but still above the historic average (+4%).
- Manufacturers expect output to grow at a roughly similar pace in the coming quarter, with 30% predicting growth and 23% a decline, giving a rounded balance of +8%.
- Expectations for growth in average selling prices for the coming three months (+22%) were the highest for a year (February 2018: +25%), and significantly above the long-run average (+3%).
- 19% of firms said their present stocks of finished goods were more than adequate, while 9% said they were less than adequate, giving a balance of +10%. This was roughly in line with the long-run average (+13%) but the highest since May 2018 (12%).
Is the current uncertainty over Brexit damaging your business? For advice on preparing for a no-deal scenario, email me or call me on 020 7099 2621.