Manufacturers losing optimism, says CBI report

Posted on 27 Jul 2011 by The Manufacturer

In a quarterly Industrial Trends Survey conducted by the CBI, results released this week show that manufacturers are slowly losing hope in the prospect for a sustained recovery.

For the first time in the past two years, optimism among UK manufacturers fell. The last time sentiment within the industry fell was in July 2009 – the lowest point of the recession.

Respondents to the survey reported that although growth was still above the long-run average, the rate of growth was again slower than the strong expansion over the past year. Growth in total orders and production eased slightly over the period running from April to June and those manufacturers who responded to the survey expect a further decrease over the next three months.

Respondents said that they plan to cut their workforces over the next three months, as well as revising down their investment plans for the upcoming 12 months.

In response to the expected marked decrease in activity, manufacturing businesses are reappraising their business plans. Investment intentions for the year ahead have also weakened. In particular, manufacturers are planning to spend less on plant and machinery compared to the past year, with plans for capital spending now below their long-run average for the first time since July 2009.

“This slowdown is expected to persist into the third quarter. Consequently, manufacturers are now reappraising their business plans, with firms expecting to lower recruitment in the coming quarter and invest less in the year ahead,” said Ian McCafferty, the CBI’s chief economic advisor.

George Archer