UK manufacturers face fastest fall in orders in three years - CBI
UK manufacturers have reported new orders falling at the fastest pace in three years, with investment intentions slashed as business optimism dims due to stuttering Brexit negotiations.
A survey of Britain's industrial sector by the CBI found a balance of 6% of firms reporting lower orders in the three months to October, down from a -1% balance in the previous survey and the weakest since October 2015 as both domestic orders and export orders both fell into negative territory. Economists had expected another -1% reading.
What's more, a balance of 4% manufacturers expect new orders to fall over the next three months, driven by pessimism about domestic orders, with more firms still expecting export orders to grow.
On the more positive side, a balance of 13% of firms said the volume of output over the past three months was up, up from +11% in the quarter to September.
However, a balance of 3% of firms expect output growth to stall in the coming three months, the weakest expectations in around three years.
The CBI found investment intentions for the year ahead had deteriorated significantly over the three-month period, with spending on buildings, training and innovation expected to be cut back in the year ahead.
A balance of 19% manufacturing companies plan to cut back on spending on plant & machinery, the fastest pace since July 2009 and a major switch from the 4% positive balance seen in July.
Investment plans for buildings for the year ahead also fell further below the negative long-run average, dropping to -30% from -14% the prior quarter.
“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," said Rain Newton-Smith, CBI chief economist.
She also said the government’s main priority on Brexit must be securing a withdrawal agreement, to allow a "much-needed transition period that will give businesses the breathing space they need".
Tom Crotty, chair 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."
He added that manufacturers will be "deeply concerned" with the government’s proposals for a post-Brexit immigration system that "risks worsening skills shortages" due to its ignorance of the importance of low-skilled labour to the economy.