CBI predicts solid outlook for UK’s manufacturers

Posted on 16 Dec 2014 by Jonny Williamson

Activity in the manufacturing sector remained steady in December, and production is expected to continue rising in the next three months, according to the latest CBI Industrial Trends Survey.

The survey of almost 500 manufacturers found that total order books edged up slightly to +5%, remaining strongly above average. While still relatively weak, export order books improved slightly to -13%, a four-month high versus the average -20%.

Rain Newton-Smith, director of Economics, CBI
Rain Newton-Smith, director of Economics, CBI

CBI’s director of Economics, Rain Newton-Smith, commented: “The manufacturing sector is ending 2014 on a more upbeat note, having lost a little momentum earlier in the year.

“Export orders have improved, and output is expected to continue growing as we head into the New Year. However, the otherwise solid outlook for UK manufacturers is tempered by a challenging global backdrop. With Eurozone growth disappointing and some emerging markets facing a tough time, firms need to look harder for opportunities to ramp up exports to high-growth sectors across the globe.”

Output growth has been broadly steady since August, and remained above average this month. Among the various sectors, growth in motor vehicles & transport equipment rose to a nine-month high.

Firms expect output to grow in the coming quarter, with 31% predicting growth and 15% a decline, giving a balance of +16%. Output price inflation expectations for the next quarter rose to their highest (+7%) since April 2014 (+9%)

Almost a fifth (17%) of firms said their present stocks of finished goods were more than adequate, and 9% reported they were less than adequate, giving a rounded balance of +9%, below the long-run average (+14%).

Mark Morley, director of Manufacturing, OpenText
Mark Morley, director of Manufacturing, OpenText

Reflecting on what the manufacturing industry needs to continue evolving over the next year and successfully compete on a global stage, director of Manufacturing at OpenText, Mark Morley said: “The ‘Made in Britain’ tag has certainly helped to drive growth in UK manufacturing over the past couple of years and the latest figures highlight a growing confidence in UK domestic sales. Over the past 24 months, increased consumer wealth in markets such as China and India, has driven a desire to purchase British luxury goods – everything from Burberry fashion to Dyson products, Jaguar Land Rover and Rolls–Royce vehicles. The UK’s automotive industry has also exported 80% of all manufactured vehicles over the last year, which is quite a turnaround from where the industry was only a few years ago.

“A combination of increased domestic sales and lower utilities prices are contributing to the success of the UK manufacturing industry, allowing firms to boost workforce numbers, invest in restructuring supply chains and develop digital strategies by moving legacy ICT infrastructures to modern cloud-based environments.

“In the long-term, measures that encourage UK manufacturers to adopt a digital business strategy, will allow companies to remain competitive on a global stage – and more importantly – will contribute to even further growth of the UK manufacturing industry.

“As we move into 2015, government initiatives need to support the continued growth of the UK manufacturing industry and focus on its role in helping rebalance the economy. The trend towards globalisation means that organisations need to focus on developing supply chains that have the agility to support the growing volume of cross-border transactions while remaining responsive to changing customer demands.”