Manufacturing lull as demand weakens, but firms see stability to come

The UK’s manufacturing production output recorded a decline for the first time in the last two years, according to the CBI.

The Quarterly Industrial Trends Survey finds that during the three months to October, manufacturing production edged downwards, with new export orders falling at their fastest pace in three years.

Total new domestic orders reduced over the last quarter for the first time since April 2013.

However, despite this, firms have signalled that they expect overall conditions to stabilise over the next quarter.

The 463 manufacturers surveyed predict that overall manufacturing conditions will stabilise in the next three months, with a small rise in output, although export new orders are expected to edge down slightly further.     

Firms highlighted concerns about political and economic conditions abroad and their impact on export orders.  Worries about price competition rose and the number of manufacturers citing uncertainty about demand as a constraint on investment was the highest in two years. 

“Manufacturers have been struggling with weak export demand for several months, because of the strength of the pound and subdued global growth. But now they’re also facing pressure back home as domestic demand is easing,” commented Rain Newton-Smith, CBI Director of Economics.

“While on balance firms expect orders to stabilise next quarter, it’s disappointing that firms are having to scale back their investment in innovation.

“Over the longer term, strong investment in innovation and skills is vital to boosting our performance in exports, enhancing our manufacturing growth and improving productivity.”

Investment intentions for the year ahead for “tangibles” - buildings and plant and machinery - remained unchanged from October.  However, intentions for investment in ‘intangibles’ - training and product and process innovation - fell to their lowest levels since July 2011 and July 2009 respectively.