Sluggish exports continue to hinder manufacturing, says CBI

Posted on 24 Jun 2015 by Jonny Williamson

A fall in export demand slowed the recovery in the UK’s manufacturing sector in June, according to the business organisation, although output growth and total orders are still above their long-run averages.

The CBI’s latest Industrial Trends Survey shows export orders slipped back following two months of improvement.

Meanwhile, output growth improved again in the three months to June and is expected to strengthen gently over the quarter ahead. Growth still remains below rates reached in late 2013 and early 2014.

Although total order books remained above average, they continued to deteriorate, reaching a 23 month low.

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

Competitive pressures remained intense in the sector, and over the next three months, manufacturers expect the greatest fall in prices since 2009.

Rain Newton-Smith, CBI director of economics, commented: Output and overall orders are still doing better than average but hopes that export demand would start to drive forward have not yet been fulfilled.

“Improving momentum in the Eurozone is being offset by the effect of the strengthening pound on UK manufacturers’ overseas sales and margins. On top of that, the ongoing Greek saga is causing uncertainty.

“In the Budget next month, the Government should look to provide struggling exporters with support to help break into key markets.”

Key findings:

  • 25% of firms said their export order books were below normal, 9% said they were above, giving a rounded balance of -17%. That is the lowest since March when it was -26%.
  • 26% said total order books were below normal, 19% said they were above, giving a balance of -7% which is, by a narrow margin, the lowest since July 2013 when the balance was -12%.
  • Average prices at which manufacturers expect to book domestic orders over the next three months are expected to fall, according to 13% of respondents while 6% expect them to rise. The balance of -7% is the lowest since November 2009 when it was -7%.
  • Asked about output volumes over the past three months. 35% said they had risen, 22% said they had fallen, producing a balance of +13%. This is the highest since February, when it was +17%.
  • Over the next three months, 33% expect output volumes to rise, 17% to fall, giving a similar balance of +16%.