Survey suggests UK manufacturing conditions stabilising

Posted on 20 May 2016 by Jonny Williamson

Overall UK manufacturing orders improved and output grew over the past three months, according to the latest monthly CBI Industrial Trends Survey.

The survey of almost 500 UK manufacturing companies found that a rebound in the food and drink sector, following localised flooding earlier this year, drove an increase in overall output in the three months to May.

Excluding food and drink, the output balance was stable, with the other 17 manufacturing sectors showing minimal movement.

Total orders rose slightly and exports orders were largely unchanged, with both remaining above their respective long-run averages.

Meanwhile, little change in prices is expected in the months ahead and output expectations remain strong.

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

CBI director of economics, Rain Newton-Smith commented: “Conditions in the manufacturing sector seem to be a little better overall, with improving order books compared with a couple of months ago.

“But domestic and global uncertainty remains high, alongside lacklustre export demand.

“Despite recent choppiness in emerging markets, China and India remain significant sources of potential demand. An exports commission would enable exporters to better exploit the growth opportunities provided by these and other growth markets.

“Manufacturers need to work in partnership with the Government to embrace long-term opportunities and trends, particularly in digital. A greater focus is also required on developing the right skills in the sector, managing energy costs, and encouraging further R&D investment.”

Key findings:

  • 16% of businesses reported an increase in total orders (up from -11% in April), and 24% a decrease, giving a balance of -8%
  • 15% of businesses reported an increase in export orders and 29% a decrease, resulting in a balance of -14%
  • 36% of businesses reported a rise in output volumes, and 23% a decrease, giving a rounded balance of +12%, up from +1% last month
  • Output is expected to increase over the next three months, with 32% companies suggesting a rise and 12% expecting a decrease, leaving a balance of +20%
  • Average prices are expected to fall over the next quarter, with 15% companies indicating an increase and 13% suggesting a decrease, giving a balance of +2
  • 13% of businesses reported stocks as more than adequate, and 4% less than adequate, leaving a rounded balance of +10%.