UK manufacturing sector struggles as Brexit looms large
UK factories are continuing to struggle, an industry survey suggested on Tuesday, weighed down by Brexit and the global manufacturing slowdown.
The total orders balance for the Confederation of British Industry's monthly industrial trends survey for September was -28%, compared to -13% in August, coming in well below consensus expectations of -16%.
Just 6% of firms said export order books were above normal, while 37% said they were above normal, giving a rounded balance of -32%, compared to -15% in August.
Of those surveyed, 25% said output volumes rose in September and 24% said they were down, giving a balance of +1%. That was an improvement on August’s -3% and puts it in reach of the long-run average of +4%.
Despite that, manufacturers remained pessimistic about the immediate future, with 19% predicting growth and 38% seeing a decline in the next three months, giving a balance of -19% - the weakest since April 2009. Price inflation is also predicted to accelerate beyond the long-run average in the next three months.
Anna Leach, CBI deputy chief economist, said: "Following a stabilisation in last month’s data, UK manufacturers have become noticeably gloomier in September. This likely reflects a combination of heightened Brexit uncertainty and the ongoing global slowdown in manufacturing."
Tom Crotty, chief of the CBI Manufacturing Council and group director of chemicals group Ineos, said: "Given there is still no Brexit resolution with just weeks to go until the 31 October deadline, it is no surprise that manufacturers have reported a gloomy outlook. Each day of Brexit uncertainty sees firms forced to withhold key investment and recruitment decisions that make a huge difference to communities across the country."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Britain’s manufacturing sector is feeling the full force of the global slowdown, unlike earlier this year, when stockpiling ahead of the original March deadline for Brexit temporarily supported demand. The 31 October deadline does not appear to be triggering the same degree of precautionary stockpiling.
"The CBI’s survey suggests that the risks to our forecast, for GDP to rise by 0.4% quarter-on-quarter in the third quarter, are greatest to the downside. But with the manufacturing sector only accounting for 10% of GDP, an industrial downturn can happen without the overall economy entering a recession."