UK manufacturing sector continues decline despite some signs of life
UK manufacturing output continued to fall in November, a closely-watched survey has shown, but there were signs that the sector’s fortunes could be improving.
Orders picked up by more than expected from the decade low seen in October. But they stayed well below their historical average, the CBI said in its latest industrial trends survey.
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Britain’s factories have suffered in 2019 as Brexit uncertainty has put off investment and the US-China trade war has dented global demand.
The UK manufacturing sector officially contracted in the second quarter and flat-lined in the third, putting it close to recession.
The CBI survey today painted a mixed picture of the sector. Output volumes fell at a similar pace in October, with output expanding in only five out of 17 sub-sectors.
Yet the survey of 307 manufacturers found that total order books improved compared with October.
More manufacturers reported a fall in orders than a rise, taking the balance to minus 26, but the figure was better than economists had predicted. It was also a significant improvement on October’s minus 37 score, which was the worst in almost a decade.
Anna Leach, CBI deputy chief economist, said: “While the thick fog of uncertainty from a no-deal Brexit has lifted somewhat, the manufacturing sector remains under pressure from weak global trade and a subdued domestic economy.”
She said: “Order books remain below average, and output volumes continue to fall. When taking into account the deteriorating outlook for manufacturing globally, it’s clear that the outlook for the sector remains precarious.”
The CBI said the fall in output was driven largely by the motor vehicles, metal products, and metal manufacture sub-sectors.
In the run-up to the UK General Election on 12 December, both main parties have promised significant spending increases on infrastructure that could boost the sector.
Leach said that on top of this, “ratifying a Brexit deal and moving on to build a vibrant future relationship with our biggest trading partner, based on frictionless trade, will be vital”.
The pick-up in orders made manufacturers more optimistic about the coming quarter. They now expect output to be broadly flat over the next three months, whereas in October they predicted a significant fall.
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Nonetheless, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the survey “remains consistent with a deepening downturn in manufacturing output, despite the partial recovery of the total orders balance in November”.
“The manufacturing sector is showing no sign yet of pulling out of its recent downturn,” he said. “With the Conservatives’ Brexit vision turning increasingly ‘hard’ under [Prime Minister Boris] Johnson’s stewardship, a renewed long-term structural decline in the UK’s manufacturing sector potentially lies in store.”
(Image credit: Getty)