UK manufacturing output surges with orders at highest level in 30 years

Total orders are at their strongest rate since 1988, although growth is expected to slow in the next quarter

Stephen Little
Tuesday 21 November 2017 18:28
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The CBI reported a significant improvement in output for food and drink and chemicals
The CBI reported a significant improvement in output for food and drink and chemicals

UK manufacturing output growth accelerated in the three months to November – with orders at their strongest for nearly 30 years.

According to the CBI’s latest survey of the sector, total orders were their strongest since 1988, with a significant improvement in food and drink and chemicals.

Export order books were the joint highest in more than 20 years, with a notable strengthening in chemicals, electronics and the transport sectors. This increase has been driven by the fall in the pound, which has made British goods cheaper abroad.

The survey will come as welcome news for Chancellor Philip Hammond ahead of Wednesday’s Budget.

Anna Leach, CBI head of economic intelligence, said: “UK manufacturers are once more performing strongly as global growth and the lower level of sterling continue to support demand. Output growth has picked up again, and export order books match the highest in more than 20 years.

“Nonetheless, uncertainty continues to hold back investment and cost pressures remain strong. Manufacturers will be hoping the Budget brings some relief from the business rates burden in particular."

The survey was conducted between 26th October and 14th November, covering 397 manufacturers.

While output is expected to continue expanding in the three months to February, it will be at a more moderate pace.

The net balance of manufacturers reporting total order books above normal was 17 per cent, up from -2 per cent in October.

Despite economic uncertainty regarding Brexit, there was a positive balance of 13 per cent for output growth in the next three months, with 27 per cent of firms predicting a rise in volumes.

A net balance of 17 per cent of companies expect average selling prices to increase in the coming three months.

Howard Archer, chief economic adviser at EY ITEM Club, said a “very competitive” pound and healthy global demand were helping UK manufacturers compete in foreign markets.

However, he pointed out that while the export environment looks bright, domestic conditions could prove challenging in the coming months despite the surge in November’s orders.

“Increased prices for capital goods and big-ticket consumer durable goods, squeezed consumer purchasing power, and economic and political uncertainty will not make life easy for manufacturers,” Mr Archer said.

“Businesses’ willingness to invest and buy capital goods is being tested by extended weak UK economic activity as well as Brexit uncertainties,” he added.

Separate figures from the Office for National Statistics show that industrial production rose by 0.7 per cent during September, more than double the 0.3 per cent financial analysts had expected.

Manufacturing output also grew by 0.7 per cent, also ahead of expectations.

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