Exports provide a boost for UK manufacturers

Posted on 24 Aug 2016 by Jonny Williamson

Export order books have reached a two-year high over the past three months, according to the latest CBI Industrial Trends Survey – however, total orders remained static.

The latest CBI monthly Industrial Trends Survey polled more than 500 firms and found that export order books reached a two-year high.

Chemical plant
Chemical manufacturers accounted for just over half the improvement in export orders.

According to the organisation, such a finding suggests that the depreciation of sterling since the end of last year may be feeding through to stronger overseas demand.

Chemical manufacturers accounted for just over half the improvement in export orders, with less than one-third of the 17 manufacturing sub-sectors reporting export orders at below normal levels.

Despite the improvement in exports, total order books were largely unchanged, the CBI stated, but remained comfortably above the long–run average.

Output growth remained at a healthy pace, although a little weaker than in the three months to July.

Price expectations for the three months to November rose to their highest since February 2015, perhaps in response to the rise in the cost of imported raw materials following sterling’s depreciation.

Anna Leach, head of economic analysis and surveys, CBI.
Anna Leach, head of economic analysis and surveys, CBI.

CBI head of economic analysis and surveys, Anna Leach explained: “It’s good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in sterling is helping to bolster export orders.

“But the pound’s weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices.

Leach added: “Manufacturers will welcome the new government’s focus on industrial strategy as well as the Chancellor’s recent guarantee over EU funding, which will help to provide certainty for universities and businesses investing in innovation and research and development.

“The most significant effects of the vote to leave the EU will flow over the medium to long-term. Therefore firms need to see ambitious decisions in the Autumn Statement that will secure the UK’s economic future as changes to trade, regulation and access to skills loom on the horizon.”

Key findings:

  • 19% of businesses reported total orders to be above normal (compared with 18% in July), and 24% said orders were below normal, giving a balance of -5%
  • 21% of businesses reported exports orders to be above normal and 27% below, resulting in a balance of -6%, the highest since August 2014 (-3%).
  • 34% of businesses reported a rise in output volumes, and 23% a fall, giving a rounded balance of +11%, down from +16% last month, but better than expected (+6%)
  • Output growth is expected to remain steady over the next three months, with 30% companies expected a rise and 19% expecting a fall, leaving a balance of +11%
  • Average prices are expected to increase over the next quarter, with 17% companies expecting to raise prices and 8% expecting to cut prices, giving a balance of +8% – the highest since February 2015
  • 14% of businesses reported stocks as more than adequate to meet expected demand, and 10% less than adequate, leaving a rounded balance of +4%.