UK factories stockpiling at record rate amid Brexit uncertainty - CBI

Factories in the UK have been stockpiling goods at the fastest rate since the 1950s amid Brexit uncertainty, according to the latest quarterly survey from the Confederation of British Industry.

Stocks of raw materials, work in progress, and finished goods all grew at their fastest paces on record in the quarter to April, the CBI said.

However, business optimism continued to decline and the total orders balance fell to -5 in April from 1 in March, missing expectations for a reading of 3.

CBI chief economist Rain Newton-Smith said: "UK manufacturing activity is just about holding up, but the unprecedented pace of stockpiling suggests that Brexit contingency planning stayed at the forefront of manufacturers’ minds.

"It’s encouraging that securing a Brexit extension has removed the cliff edge of a no-deal for now. However, it does not give manufacturers the longer-term certainty that they desperately need to invest in their businesses. For the good of the UK manufacturing sector, politicians must use this time well and come back with a renewed effort to get a deal over the line."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The industrial sector is slowing following the temporary surge in demand from overseas firms who stockpiled components in case of a March no-deal Brexit. The decline in the total orders balance was driven by a fall in the export orders component to -5, from +8 in March. Nonetheless, the total orders balance is consistent on past form with modest year-over-year growth in manufacturing output of about 1%. In addition, manufacturers’ confidence has improved tentatively, following the Brexit reprieve.

"The quarterly business optimism balance rose to -13, from -23 in Q1, though it remained below its 35-year average of -4. Investment intentions also recovered modestly, but remained well below pre-Q4 2018 levels, when businesses were less anxious about Brexit, and the high levels one would expect from the dearth of spare capacity. In addition, the net balance of manufacturers reporting rising employee numbers increased to +9 in April, from -4 in January. On balance, then, the CBI’s survey provides some reassurance that the manufacturing sector is starting to move in the right direction."