UK manufacturing output declines slightly over three months to October, CBI says

Output from UK factories slipped slightly over the past three months, even as business sentiment dropped at the fastest rate since the start of the pandemic, the results of a closely followed survey revealed.

According to the Confederation of British Industry's Industrial Trends Survey, a gauge of manufacturing output was roughly unchanged at -4%, meaning that production fell at a similar pace as in the quarter to September.

However, the balance of firms declaring themselves to be more pessimistic fell at its quickest clip since April 2020, from -21% for July to -48% in August.

"It's a tough time for manufacturers. Price pressures remain acute, availability of materials is still a big issue – and it is 49 years since manufacturing firms were this worried about being able to find workers with the skills they need," said CBI lead economist Alpesh Paleja.

"It's really no surprise that sentiment has deteriorated further."

Skilled labour shortages were cited as a likely constraint for output over the next three months by 49% of firms, up from 39% for the quarter through July, the most since October 1973.

The new orders balance for the quarter to October meanwhile fell from +11% for the quarter to July to -8%, reflecting declines in foreign orders and domestic orders.

Materials and components shortages on the other hand continued to ease with the share of firms citing them as a constraint reducing from 71% for the quarter to April, and 63% for the quarter to July to 54% for the quarter to October.

Investment intentions for the year ahead were "mixed" amid sharp falls in those for plant and machinery, as well as for investment in buildings.

Average cost growth was expected to remain exceptionally strong over the following quarter with a balance of +82%, which was well above the long-term average of +16%.