The survey of 326 manufacturing firms showed that output grew at a pace above the long-run average in the three months to January, a little slower than in the three months to December. Manufacturers expect volumes to continue growing at a similar pace over the next three months.New domestic orders were unchanged over the past three months, stabilising from a fall in the previous quarter, which was the first decline in three years. While new export orders picked up following a fall in the three months to October, growth was weak and well below the highs seen in mid-2018. Overall order books remained strong, with export order books particularly robust.Meanwhile, business optimism in the quarter to January fell sharply with sentiment regarding export prospects dropping at the fastest pace since the financial crisis. And manufacturers’ concerns that political and economic conditions abroad were likely to limit their future ability to obtain export orders were at their highest level since the immediate aftermath of the EU Referendum.Investment intentions for the coming year remained notably below their long-term averages, with spending on buildings, plant & machinery, training and innovation all expected to be lower in the year ahead.Stocks of raw materials in the three months to January grew at a similarly strong pace to October, while stocks of works in progress and finished goods were flat. Anna Leach, CBI Head of Economic Intelligence, said “the manufacturing sector is clearly feeling the pinch of Brexit uncertainty, with worsening business sentiment coinciding with an ongoing reluctance to invest in new facilities, machinery, innovation and training. Notwithstanding continued growth in output, these underwhelming figures in part reflect businesses’ continuing desire for clarity. “With uncertainty risking paralysis among manufacturers, it is vital for politicians to compromise and break the Brexit deadlock, paving the way for UK manufacturers to continue trading in global markets with minimal disruption.”Tom Crotty, Group Director of INEOS and Chair of CBI Manufacturing Council, said “the last quarter has been a challenging one for manufacturers, who are understandably bracing themselves for the frightening prospect of a ‘no deal’ Brexit. Uncertainty has sadly become the norm, and this is holding back growth and investment in the manufacturing sector. “It is vital that the Government finds a positive solution to the current Brexit deadlock so firms can continue to compete both at home and abroad.”Key findings:• 11% of firms said they were more optimistic about the general business situation than three months ago and 34% were less optimistic, giving a balance of -23%, the fastest decline since July 2016. Optimism about export prospects for the year ahead deteriorated at the fastest pace since January 2009 (-32% from -15% in October)• 28% of firms said the volume of output over the past three months was up and 12% said it was down, giving a balance of +16%, lower than the three months to December (+23%)• 27% of businesses reported an increase in new orders, and 24% reported a decrease, giving a rounded balance of +3% (from -6% in the three months to October). Domestic new orders were flat (0% from -10% in October) and export new orders rose slightly (+9% from -8% in October)• 21% of manufacturers said employee numbers were up in the quarter to January, while 25% said they were down, giving a balance of -4%. This constitutes a decline in comparison with the previous quarter (+7%) and the first fall since October 2016• Growth in average unit costs (+26%) in the quarter to January slowed slightly compared with the previous quarter (+30%), but remained well above the long-run average (+12%)• Average domestic prices in the three months to January (+7%) grew at a similar pace to the three months to October (+6%)• Average export prices remained broadly unchanged (0%, from +3% in the three months to October), which was the lowest rate of growth since April 2016.Key findings – looking ahead:• Output growth (+14%) in the next three months is expected to continue at a similar pace• New orders over the next three months are expected to remain flat (-1%), with domestic orders falling slightly (-4%) and export orders growth expected to pick up further (+15%)• Employee numbers are expected to be unchanged in the next three months (-2%)• Average unit costs are expected to grow at a roughly similar rate next quarter (+24%)• Domestic price inflation (+18%) and export price inflation (+15%) are both expected to pick up next quarter• Orders or sales remains the factor cited as most likely to limit output over the next three months (60%) • Planned spending on plant & machinery (-18%) and buildings (-24%) remain more negative than their long-run averages (-7% and -18%, respectively)• Similarly, manufacturers also expect to continue to reduce training expenditure and product & process innovation in the year ahead (-11% from -10% and -8% from -6%, respectively, in the previous quarter) • The factor most cited as likely to limit capital spending in the year ahead was demand uncertainty (58%), with concerns at their highest in more than five years. Meanwhile, concerns over labour shortages as a factor to limit investment continued to be at an all-time high (21%).
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