British manufacturing continues down a gloomy path with expectations for exports in the year ahead the worst in 18 years, according to the CBI’s quarterly Industrial Trends Survey.
At -44, the October reading for optimism about the general business situation was the weakest since July 2016, returning to the lows that followed the EU referendum. The measure for export prospects came in at -46, the lowest since October 2001.
“Brexit concerns have clearly driven concern about the near-term outlook for exports, with citations of political and economic uncertainty abroad and quota/import licence restrictions spiking to multi-decade highs,” the CBI said.
Investment intentions also worsened, with planned spending on buildings, plants and machinery, and training and retraining posting the sharpest drops since early to mid-2009, when Britain was still reeling from the effects of the financial crisis.
Likewise, manufacturers expect their output to fall in the next three months at the fastest pace since early 2009, compounding the decline between August and October.
Headcount in the sector fell at its fastest since April 2010, with firms anticipating an even sharper decline in the next three months.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the global economic downturn also played a part and noted that the survey was conducted in the first half of October, before the government announced a new Brexit deal.
But he added: “With the accompanying political declaration laying out a harder former of Brexit than previously envisaged, with a clear commitment to take Britain out of the customs union, we doubt that manufacturers have become more optimistic since the new deal was struck. The downturn in the manufacturing sector, therefore, looks like it has plenty further left to run.”
Boding ill for future output, the survey’s measure for manufacturers’ total order books was at its lowest since January 2010 and worse than expected by economists.
Rain Newton-Smith, CBI chief economist, said: “Finding a resolution that avoids a no-deal Brexit will give firms the confidence they need to step up investment in people, growth and innovation.
“But for long-lasting prosperity we need an ambitious free trade agreement which provides tariff-free access to our largest trading partner for our manufacturers right across the country.”
Another survey showed earlier this month that uncertainties around Brexit and future tariffs, as well as the volatile pound are holding back British exports.
The CBI interviewed 258 firms between 25 September and 14 October.
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