UK Manufacturing Output Declines as Optimism for Future Growth Rises, CBI Survey Shows

Manufacturing output in the UK fell in the quarter leading up to February, showing a decline at a pace similar to the previous quarter, according to the latest Industrial Trends Survey (ITS) from the Confederation of British Industry (CBI). Despite this, manufacturers are optimistic about the future, anticipating a modest rise in volumes in the next quarter, from March to May.

The survey, which reflects the responses of 352 manufacturers, highlighted that the volume of total order books improved slightly compared to the previous month, although export order books remained largely unchanged. Both total and export order books, however, continued to be below average. Firms also noted a significant deterioration in stock adequacy compared to the previous month, with the balance falling below the long-run average.

In terms of output volumes, the survey reported a fall in production for the three months to February, with a weighted balance of -12% compared to -13% in January. While output declined across 16 out of 17 sub-sectors, the most significant drops were observed in the glass & ceramics, building materials, and metal manufacturing industries. Looking ahead, however, manufacturers are forecasting a rebound in output volumes in the three months to May, with an expected balance of +8% compared to -19% in January.

Other key findings from the survey include:

• Total order books showed a slight improvement to -28% from -34% in January, though still below the long-run average of -13%.
• Export order books remained weak, with a balance of -36%, unchanged from the previous month and still below the long-run average of -36%.
• Manufacturers are expecting selling price inflation to ease slightly, with expectations for the next quarter falling to +19% from +27% in January, but still above the long-run average of +7%.
• Stock adequacy deteriorated, falling below the long-run average, though finished goods were reported as being more than “adequate” on balance (+4%).

Ben Jones, the CBI’s lead economist, commented on the results: “The survey paints a downbeat picture of the manufacturing sector over the last three months, driven in part by low domestic business confidence and a subdued international environment. However, manufacturers are hopeful for a modest rebound in the next quarter. The decline in stock levels suggests that the rebuilding of inventories could be a contributing factor to the expected rise in output.”

He added, “While there are tentative signs of optimism, the current weakness in manufacturing underlines the importance of the Government’s renewed focus on fostering growth. Many businesses are still grappling with rising costs, including employment and energy bills.”

Kelly Becker, President of Schneider Electric UK & Ireland, Belgium, and Netherlands, responded to the report, emphasizing the role of green growth in driving economic prosperity. She stated: “The UK’s focus on a ‘net zero’ economy is not just beneficial for the environment, but is also a key driver of job creation and long-term economic growth. Decarbonisation must be at the top of businesses’ agendas as it presents a significant opportunity for the creation of high-skilled jobs, with clean energy technologies alone poised to generate 247,000 jobs in the UK.”

Becker concluded, “The UK’s industrial heritage positions it uniquely to lead the green transition. Continued investment in a ‘net zero’ economy will not only bolster growth and strengthen the economy but will also help the country achieve its climate goals.”

This report highlights both the challenges and opportunities facing the UK’s manufacturing sector, with manufacturers hopeful that a focus on innovation, investment, and sustainability will drive future growth.