Uncertainty over Brexit biting in manufacturing

Manufacturing new orders the fastest pace in three years in the quarter to October, reflecting falls in both domestic and export orders, according to the latest quarterly CBI Industrial Trends Survey.

The survey of 354 manufacturers showed that output growth was stable at an above-average pace in the three months to October relative to the quarter to September.

But output growth is expected to stall in the three months to January 2019 – marking the weakest expectations in around three years. Total new orders are also set to fall a little further in the quarter ahead.

Business optimism tumbled at the fastest pace since the UK’s vote to leave the EU, while optimism about export prospects for the year ahead fell at the fastest pace since the Eurozone crisis.

Meanwhile, concerns that political and economic conditions were likely to limit export orders over the next three months were the highest since immediately after the EU Referendum. fell at

Investment intentions for the year ahead deteriorated significantly in the three months to October, with spending on buildings, training and innovation expected to be cut back in the year ahead.

Capital expenditure on plant and machinery is set to be reduced at the fastest pace since July 2009.

Skills shortages are also biting, with concerns that access to workers is likely to constrain investment over the year ahead remaining at a survey high. Meanwhile, fears that access to skilled labour is likely to limit output over the quarter ahead rose to the highest in more than 40 years.

Looking more broadly at the UK economy, services growth is holding up, but overall growth is expected to remain subdued, reflecting weak household income growth and the drag on investment from Brexit uncertainty.

Rain Newton-Smith, CBI chief economist, said: “This is a sobering set of figures demanding immediate action at home and abroad.

“Planned investment is being scaled back in the face of deepening Brexit uncertainty, so it’s vital that the chancellor incentivises manufacturers to spend in areas that will help them become more productive. Using the Budget to increase the Annual Investment Allowance, alongside a wider review, could help the UK become competitive with its global peers.

“Combined with meaningful business rates reform, these steps can help the UK economy to make the advances in digital and new technologies envisaged in the Industrial Strategy.

“Aside from much-need progress on domestic policy, the government’s main priority on Brexit must be securing the Withdrawal Agreement, ushering in a much-needed transition period that will give businesses the breathing space they need.

“Protecting jobs and people’s livelihoods from a lost generation investment remains urgent.”

Tom Crotty, group director of INEOS and chairman of the CBI Manufacturing Council, said: “These figures are concerning and must not be taken lightly. Ongoing uncertainty around Brexit has made for a particularly tough quarter for the UK’s manufacturers. It is not surprising that many firms have recently moved publicly from contingency planning to action as the likelihood of a ‘no deal’ Brexit increases.” more of

Rain Newton-Smith, CBI chief economist, said the “sobering set of figures demands immediate action at home and abroad”.