The latest release of the 'Industrial Trends Survey' by the Confederation of British Industry (CBI) gives an insight into how the UK manufacturing sector is holding up in light of internal and external factors by analysing the data supplied by 379 UK manufacturers.
The Main Findings Of The August 2018 CBI Survey
Although output had slowed down somewhat in the 3 months prior to August, it was still higher than the long-term average. This output growth was spread across 13 of the 17 manufacturing sub-categories but was especially driven by the 'food, drink and tobacco' sector. 39% of manufacturers saw an increase in output while 18% saw a fall, giving a positive balance of 21%. Nearly a third of those in the poll (32%) said they expected the volume of output to grow at the same pace into the next quarter. Although 13% of manufacturers predicted a decline, this still gave a healthy balance of 20%.
Total order books had dropped slightly since July but were still above the long-term average with 31% of manufacturers recording above-average order books and 23% below (giving a balance of 7%.)
Output price inflation continued the same trend which had first been seen 6 months ago. There was a balance of 15%, which was slightly up from July's figure of 13%. 17% of manufacturers predicted that average selling prices would increase while 2% expected a price drop.
Although overall economic growth had been weakened by slow household income growth at home, UK manufacturers continued to reap the benefits of a lower sterling exchange rate. Export orders remained strong with nearly a quarter of manufacturers recording that orders were above normal. Although 15% reported below average export orders, this still left a balance of 9%.
The Impact Of Brexit On Industry
The CBI highlighted the continued uncertainty over the outcome of the ongoing Brexit talks as the main threat to overall economic growth in 2019. Apart from an understandable general reluctance among manufacturers to invest until matters are resolved, there is the worry that a 'no deal scenario' would be damaging for UK manufacturing and continued unrestricted trade with the rest of the EU.
Anna Leech, the CBI head of economic intelligence, said that UK companies were eager to see progress being made on the Withdrawal Agreement. She warned against the dangers of international trade tensions and increasing protectionist rhetoric which is aimed at a domestic audience. She also urged both sides to demonstrate both compromise and flexibility so that the trade between the UK and the EU, worth 600 billion euros every year, could continue.
Quiet Optimism For 2019
Overall, the CBI survey was quietly optimistic about both the current situation of UK manufacturers and their future prospects. Brexit continues to be of concern for all those involved in industry. However, with 67% of manufacturing exports from the UK being made to non-EU countries, the sector is robust and is sure to ride out any short-term disruption.
This was echoed at the recent Santander Inaugural Manufacturing event that I attended. Most of the companies and representatives of various trade bodies were quietly confident that whatever Brexit throw at us, we manufacturers will adapt and overcome the challenges we face as we always have.