23 October 2025
The UK manufacturing sector endured another challenging period in the quarter to October, with output and orders falling sharply, sentiment deteriorating and investment plans cut back sharply, according to the latest quarterly CBI Industrial Trends Survey.
Manufacturing output fell in the three months to October. The downturn was broad-based across sub-sectors, but driven by metal products, metal manufacture and electronic engineering. Firms expect output to fall again over the quarter to January.
Demand conditions weakened notably. The volume of total new orders fell sharply through the quarter. Both domestic and export orders fell at their fastest rates since the early stages of the Covid pandemic (July 2020). Levels of total and export order books remain well below their long-run averages, and manufacturers anticipate another drop in new orders over the next three months.
Cost pressures remain elevated, although growth in domestic selling prices has slowed and export prices have fallen, suggesting a squeeze on margins. Manufacturing competitiveness fell in all major markets.
Manufacturers’ investment appetite has deteriorated markedly. Spending plans for the year ahead fell across every category, held back by weak demand, inadequate net returns and shortages of internal finance. Investment in plant & machinery and buildings looks set to fall particularly sharply. The share of firms investing to expand capacity fell to a level last seen in the recessions of 2009 and the early 1980s. Meanwhile, employment fell at the fastest pace for five years.
Ben Jones, Lead Economist, CBI, said:
“Manufacturers are finding the going tough. Order books are weakening, cost pressures remain stubbornly high, and uncertainty is rising ahead of the Budget. This is making businesses increasingly reluctant to commit to new hiring and investment.
“To get manufacturing moving again, firms need to see the government accelerate energy cost support. That will help address a significant factor crippling the sector’s competitiveness. The Chancellor must also commit to no further business tax rises at the Budget and to boosting resources for exporters that will help firms maximise trading opportunities while raising productivity and growth.”
The survey, based on the responses of 218 manufacturing firms, found:
- Business sentiment deteriorated in October, with manufacturers’ optimism about both the business situation (weighted balance of -31%) and export prospects (-43%) declining further.
- Output volumes fell in the quarter to October, at a similar pace to the quarter to September (-16%, from -13% in the three months to September). Firms expect volumes to fall again in the three months to January (-19%).
- The decline in output volumes was broad-based (14 out of 17 sub-sectors) and was driven by declines in the metal products, metal manufacture, and electronic engineering sub-sectors.
- The share of firms citing orders or sales as a factor likely to limit output in the next three months rose from July and stands above the long-run average (73%, from 62% in July).
- Total new orders fell through the quarter (-20%, from -17% in July), reflecting the fastest pace of decline since July 2020 for both domestic orders (-26%) and export orders (-26%). Manufacturers expect the total volume of new orders to decline again in the three months to January (-23%).
- Investment intentions for the year ahead have deteriorated. Manufacturers expect to reduce investment in plant & machinery (-46%, the lowest since April 2020, from -15% in July), in buildings (-42%, from -28%), in product & process innovation (-20%, from -6%), and in training & retraining (-19%, from -13%).
- The share of firms citing capacity expansion as a reason for capital expenditure over the next 12 months fell to its lowest since April 2009 (13%, from 28% in July). 47% of respondents cited increased efficiency as a reason for capex, and 46% cited replacement.
- The main constraint on investment was uncertainty about demand (cited by 65% of manufacturers, the greatest proportion since January 2021), followed by inadequate net return (35%), and a shortage of internal finance (20%).
- Average costs rose in the quarter to October at an elevated pace (+52%, from +63% in July; long-run average of +19%). Costs growth is expected to remain elevated in the quarter to January (+52%).
- Average domestic prices rose, but at a slower pace relative to July (+12%, from +33% in July), whereas export prices fell (-8%). Both domestic and export prices are anticipated to rise in the next three months (+16% and +8%, respectively).
- Stocks of work in progress fell in the three months to October (-10%), accompanied by a fall in stocks of finished goods (-8%, the fastest pace of decline in five years). Stocks of raw materials were broadly flat (-1%).
- Manufacturers expect stocks of finished goods (-23%, the weakest expectations since January 2021), of raw materials (-19%) and of work in progress (-14%) to all fall in the three months to January.
- Numbers employed fell in the quarter to October (-18%, from -11% in July) at the fastest pace in five years. Manufacturers expect another fall in employment in the quarter to January (-16%).
- Manufacturing competitiveness deteriorated across all major markets in the three months to October. Competitiveness in non-EU markets worsened at a slightly slower pace (-19%, from -23% in July), whereas competitiveness in EU (-18%, from -13%) and UK (-15%, from -4%) markets weakened further.
Competitiveness is expected to decline again in the three months to January, particularly in UK markets (-23%, the weakest expectations since April 2020), followed by EU (-18%) and non-EU (-18%, a record low) markets.