CBI survey shows UK manufacturing output fell to 18-month low, citing supply and cost issues

Tue 26 Jul 2022
Posted by: Noelle McElhatton, Phillip Adnett
Trade News

UK Manufacturing Data CBI Woman Welding

Growth in UK factory orders and output is at an 18-month low due to cost pressures, supply bottlenecks and reduced demand, according to the Confederation for British Industry/Accenture quarterly survey.

Its Industrial Trends Survey – based on the responses of 237 manufacturing firms – saw business optimism down for a third quarter running, as the new order balance fell to +8 this month, down from +18 in June, and below economists’ expectations of +13, according to The Times.

Output volumes grew at their slowest pace since April 2021, when a national lockdown was in place due to Covid-19.

The survey recorded that shortages of components and materials remained acute, but off their recent highs.

Investment pickup

Despite the slowdown, the employers’ lobby group said there had been solid growth in factory jobs and welcomed evidence of a pickup in investment intentions, as reported in The Guardian.

Anna Leach, CBI deputy chief economist, said it was encouraging to see investment intentions firming up and called for government support.

“Stronger investment will be vital if the UK is to reinvigorate growth and keep recession at bay. The new prime minister will need act quickly to fan the flames of these ambitions by announcing a permanent successor to the Super Deduction and urgently reforming an outdated business rates system that currently acts as a tax on investment.”

Invest and innovate

Maddie Walker, UK head of Industry X, a digital engineering service at Accenture, said industry should pursue an investment strategy rather than battening down the hatches.

“Rather than pull back on innovation, investing in technology will help to improve productivity, keep costs down, and unlock new ways to make products more effectively,” she said.

Growth ‘at a crawl’

The figures reflect the slowdown revealed in the July purchasing managers’ index by S&P Global and the Chartered Institute of Procurement & Supply, reports the Standard.

UK private sector growth “slowed to a crawl” as weaker customer demand and staff shortages weighed on industry, according to new figures.

The closely-followed S&P Global/CIPS flash UK composite purchasing managers index (PMI) report showed a reading of 52.8 for July, dropping from a 53.7 reading for June.

Negative indicators

Chris Williamson, chief business economist at S&P Global Market Intelligence, said there were indicators that worse is yet to come.

“Manufacturing order books are now deteriorating for the first time in one-and-a-half years as inflows of new work are insufficient to keep workforces busy, which is usually a precursor to output and jobs being cut in coming months.”

Inflation action

Reuters reports that the Bank of England's Monetary Policy Committee (MPC) must decide next week whether to speed up the pace of interest rate rises with a rare half-point rate rise to tackle the highest inflation in 40 years.

Bank policymakers have been gloomy about Britain's medium-to-long-term ability to meet economic demand, in part because of low investment by international standards.