UK manufacturing activity still weak

UK manufacturing output volumes continued to fall in the quarter to November 2019, according to the latest monthly Industrial Trends Survey by the Confederation of British Industry (CBI).

The survey of 307 manufacturers found that total order books improved on October (when they were at their weakest in nine years), but remained significantly below their long-run average. Export order books also strengthened on the previous month (when they were at their weakest since the financial crisis of 2008), but also continued to be below the long-run average.

Output volumes fell at a similar pace to October, with output expanding in only 5 out of 17 subsectors. The headline fall in output volumes was driven largely by the motor vehicles, metal products, and metal manufacture subsectors. Meanwhile, the main positive contributors to output were the mechanical engineering and plastic products subsectors, alongside a boost from aerospace output. Looking ahead, firms expect output volumes to be flat in the next three months.

Manufacturers reported that stocks rose further above “adequate” levels. Meanwhile, firms expect output prices to be flat in the next quarter.

Across the economy more broadly, growth has been volatile during 2019, driven by businesses shifting activity in response to moving Brexit deadlines. The CBI expects the economy to grow modestly in the event of a smooth transition to a new Brexit deal, with the longer-term economic impact dependent upon the details within the final deal. For more on the outlook, see the CBI’s July economic forecast.

“Outlook for the sector remains precarious”

Anna Leach, CBI Deputy Chief Economist, commented: “While the thick fog of uncertainty from a no-deal Brexit has lifted somewhat, the manufacturing sector remains under pressure from weak global trade and a subdued domestic economy.

“Order books remain below average, and output volumes continue to fall. When taking into account the deteriorating outlook for manufacturing globally, it’s clear that the outlook for the sector remains precarious.

“The General Election is an opportunity for all parties to explain how they will shore up our economy. Ratifying a Brexit deal and moving on to build a vibrant future relationship with our biggest trading partner, based on frictionless trade, will be vital – both for UK manufacturers and for business as a whole.”

Click here for more details about the survey’s key findings.

For advice on coping with the twin pressures of weak global trade and a subdued domestic economy, email me or call me on 020 7099 2621.