UK manufacturing volume declines, modest rebound expected by May: CBI

Output fell in 16 out of 17 sub-sectors in the three months to February. Total order books were reported as below normal, registering a slight improvement relative to January (-28 per cent from -34 per cent). The level of order books in February remained well below the long run average (-13 per cent), the CBI said in a press release.

Export order books were also seen as below normal in February and to a similar extent as in January (-36 per cent from -38 per cent last month). This was also below the long-run average (-36 per cent).

Expectations for average selling price inflation eased in the quarter to February (+19 per cent from +27 per cent in January). But expectations remain above the long-run average (+7 per cent).

Stocks of finished goods were reported as more than adequate on balance in February (+4 per cent), but stock adequacy stands below the long-run average (+12 per cent).

“The survey paints a downbeat picture of the manufacturing sector over the last three months, which can be attributed in part to low domestic business confidence following the Autumn Budget combined with a subdued international environment,” said Ben Jones, lead economist, CBI. “Manufacturers expect to raise output in the quarter ahead. But with firms having rapidly run-down stocks of finished goods, it is possible that the need to re-build inventories partly explains this rebound. Order books remain weak from a long-term perspective.”

Jones added: “We know much of the innovation and investment necessary to drive economic growth will come from firms across the UK. Tentative signs of optimism in our survey suggest that companies are poised to work with the government to create the right environment for expansion.

“Nonetheless, the current weakness in manufacturing activity highlights how important the government's renewed focus on growth is. Many businesses are still struggling with rising prices, higher employment costs and continued pressure from stubborn energy bills. The government has several levers to create the right conditions for the ambitious delivery of growth set out by the Chancellor last month. An international facing industrial strategy, and matching skills to economic needs with changes to the Apprenticeship Levy, would be significant tailwinds for the manufacturing sector.”

The survey was based on the responses of 352 manufacturers across UK.

ALCHEMPro News Desk (SG)