Manufacturing output declined over the three months to January, easing further from December levels, and firms expect output to fall again in the quarter to April, albeit at a more moderate pace. The downturn remains broad-based, with 14 of 17 sub-sectors reporting falling output, CBI said in a press release.
Total new orders also fell sharply, matching the pace seen in October and marking the steepest decline since July 2020. Both domestic and export orders weakened, leaving total and export order books well below long-run averages. Manufacturers expect new orders to decline again in the coming quarter, though less steeply than over the past three months.
UK manufacturers remained under heavy pressure in the quarter to January, with output, orders, capacity utilisation and investment all weakening, according to the CBI.
Output fell across most sub-sectors, while new orders declined at their fastest pace since July 2020.
Cost pressures stayed elevated despite some easing, employment continued to fall, and firms plan to cut investment.
Cost pressures remain elevated despite some easing. Unit costs rose at their slowest pace for over a year in the quarter to January, while domestic and export selling prices were broadly stable. However, manufacturers expect costs to rise again in the quarter to April, with domestic and export price inflation set to accelerate as firms attempt to protect margins.
Capacity utilisation fell to 72 per cent, its lowest level since July 2020 and well below the long-run average of 80 per cent. Employment continued to decline, with further job losses expected into the spring.
“Manufacturers are finding conditions extremely tough, with output and orders falling again,” said Ben Jones, senior lead economist at the CBI. “Many firms report seeing customers delay decisions, order only what they strictly need, or hold back from committing altogether, leaving order books thin and confidence fragile. At the same time, cost pressures from rising wages, high energy prices and taxes are squeezing margins and weighing on competitiveness.”
Firms plan to cut spending on buildings, plant and machinery, and training over the year ahead, held back primarily by uncertainty about demand and inadequate net returns. While investment in product and process innovation is expected to remain broadly flat, overall capital spending plans remain constrained.
“The government must now focus on lowering the cost of doing business to unlock investment and growth. Recent pragmatism on areas such as day-one rights is welcome, but manufacturers want faster action on energy cost support and greater policy clarity overall,” added Jones.
The survey also highlighted shifting constraints on output. While shortages of skilled and other labour remained relatively stable and at their lowest levels in several years, the proportion of firms citing credit or finance as a constraint rose to its highest level since July 2020. By contrast, materials and component shortages eased further, reaching their lowest point in six years.
Stocks of finished goods fell at the fastest pace since October 2009, alongside declines in work-in-progress and raw material inventories. Manufacturers expect inventories to continue falling across all categories in the quarter to April.
The survey is based on responses from 312 UK manufacturing firms.
Fibre2Fashion News Desk (SG)
