Manufacturing order books sink to a six-year low – CBI Industrial Trends Survey

The UK’s manufacturing sector saw a widespread fall in output volumes in the three months to June, with the balance for reported output declining to its weakest since 2020 – according to the CBI’s latest Industrial Trends Survey (ITS). Manufacturers expect output volumes to fall again in the three months to September. 

Volumes of total and export orders were reported as below “normal” in June, with total order books standing at their weakest since September 2020. Selling price expectations eased in June, relative to May, but remain above historical norms. Stocks of finished goods were seen as adequate in June, broadly in line with the long-run average.  

The survey, based on the responses of 288 manufacturers, found: 

• Output volumes fell in the three months to June, with the balance weaker than at any time since the quarter to August 2020 (weighted balance of -33%, from -23% in the quarter to May). Manufacturers expect output volumes to fall further in the three months to September (-31%). 

• • Output decreased in 12 out of 17 sub-sectors in the three months to June, with the fall being driven by the food, drink & tobacco, mechanical engineering, paper, printing & media and metal products sub-sectors. No sub-sectors recorded an increase in output.  

• Total order books were reported as below “normal” in June (-45%, from -41% in May), to the greatest extent since September 2020. 

• Export order books were also reported as below “normal” (-33%, from -29% in May). The level of export order books stands below the long-run average (-19%). 

• Expectations for average selling price inflation remained elevated in June, though have eased relative to May (+22%, from +38% in May). Expectations for selling price growth remain well-above the long-run average (+8%). 

• Stocks of finished goods were reported as more than adequate in June (+11%, from +7% in May), and stand broadly in line with the long-run average (+12%). 

Cameron Martin, CBI Senior Economist, said: 

“Manufacturers are facing an increasingly difficult trading environment, with order books now at their weakest since 2020 and output continuing to fall. While selling price expectations have eased from their peak in May, they remain elevated, highlighting the cost pressures still facing the sector. 

“The agreement between Iran and the US to reopen the Strait of Hormuz will hopefully alleviate some of the challenges that have weighed on manufacturers in recent months. But it will take time for energy prices and supply chains to normalise even under the best of circumstances, while the potential for further instability is clear. This leaves firms navigating uncertainty on both global and domestic fronts, at a time when weak demand and fragile confidence are already weighing on growth prospects. 

“Manufacturers have responded to recent instability by prioritising resilience over expansion, increasing inventories, diversifying suppliers and investing in operational efficiency. While these have helped build resilience, they have also diverted resources away from the investment needed to drive growth and productivity. 

“Political uncertainty risks holding back investment at a time when manufacturers are already grappling with high costs and weak demand. The Prime Minister’s resignation should not distract from the urgent need to go further in reducing industrial energy costs and removing barriers to trade with our closest trading partners in the EU. Lowering the cost of doing business must remain central to the government’s ambitions, helping manufacturers to invest and grow.”