Manufacturing output stabilised in the quarter to January, following fifteen consecutive months of decline, according to the latest CBI
quarterly Industrial Trends Survey.
The survey of 291 manufacturers also found that total new orders fell moderately in the three months to January, after stabilising in the quarter to October, and prior to that, falling for five quarters in a row. A sharp decline was seen in domestic orders, while export orders fell at a similar pace to October.
Manufacturing employment fell again in the three months to January, but at the slowest pace since October 2019 and business sentiment declined significantly after staying flat over the second half of 2020. Optimism around export prospects also continued to fall significantly.
Output is predicted to fall in the quarter ahead with firms anticipating total new orders to fall at a slightly quicker pace, reflecting faster declines in domestic and export orders. Headcount is expected to remain broadly flat.
Meanwhile, almost half of manufacturers – the highest share since January 1975 – are concerned that access to materials or components may limit their output over the quarter ahead.
CBI chief economist Rain Newton-Smith said: “Output was broadly flat in this month’s quarterly survey, with the picture varying in different sectors. Manufacturers across the board are continuing to battle major headwinds, with domestic and export orders falling.
“With growing costs and materials shortages mounting further pressure on firms at a time when they are experiencing much less demand, the Government must avoid tapering off existing business support with a cliff edge in March.
“Acting swiftly ahead of the Budget to boost cash flow and shore up resilience will be essential. Crucially, extending the Job Retention Scheme and repayment periods for VAT deferrals until the end of Q2 will go a long way. For the duration of the crisis, business support must remain in lockstep with restrictions.”
Tom Crotty, INEOS Group director and chair of the CBI Manufacturing Council, said: “Most manufacturers will have been glad to see the back of 2020, but firms continue to operate in very difficult circumstances and the impact of this is being felt across the sector.
“While the start of 2021 is challenging, the Covid-19 vaccine drive brings with it a real sense of optimism for the future. The manufacturing sector can be an engine for UK’s economic recovery post-covid and firms are keen to work with government to make this happen.
“In the meantime however, it is essential that the sector receives the support it needs to get through the next few critical months.”