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Manufacturing activity improves in November – CBI

20 November 2018

The survey of 381 manufacturers found that output volume growth accelerated in the three months to November, outpacing the long-run average. Output expanded in 13 of the 17 sub-sectors, with growth driven by the food, drink & tobacco, motor vehicles & transport equipment, and chemicals sub-sectors. Firms expect output growth to slow somewhat over the next quarter.

Meanwhile, total order books strengthened in November after worsening in October, and were more robust than the long-run average. Export order books improved marginally following a weakening in October, and, likewise, remained stronger than the historical average.

Average selling prices were expected to increase at a steady pace, above the long-run average, while stocks were considered to be marginally above adequate levels, but below the long-run average.

We expect UK manufacturers to continue benefitting from ongoing global economic expansion and a lower sterling exchange rate, but overall economic growth is expected to remain subdued, reflecting weak household income growth and the drag on investment from Brexit uncertainty. For more detail, see our June economic forecast.

Rain Newton-Smith, CBI Chief Economist, said:

“It’s encouraging to see an improvement in the manufacturing sector after October’s stark survey, with order books and output growth on the up.

“But the future prosperity of manufacturers depends on getting the Brexit deal right. The overwhelming message from business to the Government is to make progress, don’t go backwards.

“We need frictionless trade for our world-beating manufactured goods and a transition period which draws us back from the cliff edge. Anything less than that and jobs and investment could suffer.”

Tom Crotty, Group Director of INEOS and Chair of CBI Manufacturing Council, said:

“Improvements in output volumes and overall order books will come as some relief for manufacturers following a weaker outturn in October. Firms will have also broadly welcomed the Autumn Budget, especially the progress on Apprenticeship Levy reform.

“Manufacturers’ top priority unsurprisingly continues to be for the Government to secure frictionless trade and a Brexit transition period. The sector will also be urging the Government to rethink its proposed approach to immigration policy, which, by placing tight restrictions on low-skilled labour, would have a particularly negative impact on manufacturers.”

Key findings:

  • 29% of manufacturers reported total order books to be above normal, and 19% said they were below normal, giving a balance of +10%. This was above the long-run average (-13%) and followed a weakening in October (-6%)
  • 17% of firms said their export order books were above normal, and 17% said they were below normal, giving a normal balance (0) – above the long-run average of -17%, and marginally higher than October (-4%)
  • 35% of businesses said the volume of output over the past three months was up, and 17% said it was down, giving a balance of +18%. This was above the historic average (+4%) and a slight pick-up from October (+13%)
  • Manufacturers expect output to grow at a slower pace in the coming quarter, with 29% predicting growth, and 21% a decline, giving a balance of +8%
  • Expectations for growth in average selling prices for the coming three months (+9%) were broadly unchanged from October (+10%), and the lowest since July 2017 (+9%)
  • 16% of firms said their present stocks of finished goods were more than adequate, whilst 11% said they were less than adequate, giving a balance of +5% – below the long-run average (+13%).

20 November 2018

Notes to editors:

The November 2018 CBI Industrial Trends Survey was conducted between 25th October and 13th November. 381 manufacturing firms replied.

A balance is the difference between the percentage of retailers reporting an increase and those reporting a decrease.

Across the UK, the CBI speaks on behalf of 190,000 businesses of all sizes and sectors. The CBI’s corporate members together employ nearly 7 million people, about one third of private sector-employees. With offices in the UK as well as representation in Brussels, Washington, Beijing and Delhi, the CBI communicates the British business voice around the world.