UK manufacturers report strong output growth

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A total of 35% of businesses reported an increase in total orders

Production among UK manufacturers grew at the fastest pace since January 1995 in the three months to July, according to the latest quarterly survey by the Confederation of British Industry.

The quarterly Industrial Trends Survey, which questioned 397 manufacturers, also found that employee headcount increased “at the fastest rate” for three years and that hiring intentions for the coming quarter also improved.

Optimism rose marginally in the three months to July, while export optimism for the year ahead rose at a slower, but still healthy pace. Some 18% of firms said they were more optimistic about the general business situation than three months ago while 13% were less optimistic.

Optimism about export prospects for the year ahead grew 13%, according to the data published by CBI on 25 July.

In terms of output, 43% of firms said the volume of output over the past three months was up, against the 12% who said the figure was down. This gave a balance of +31%, the highest since January 1995’s +33% balance.

A total of 35% of businesses reported an increase in total orders, while 21% reported a decline.

According to the survey, 16% of respondents expected growth for domestic order – the most upbeat since April 2015 – while 28% expected growth in export orders, the highest figure in four decades

Against this backdrop, said CBI, investment intentions improved across the board, particularly for training and retraining.

According to the survey, input cost pressures cooled in the quarter to July and are expected to soften further in the near-term, while factory gate price inflation is also expected to be more subdued. 

“Output growth among UK manufacturers is the highest we’ve seen since the mid ‘90s, prompting the strongest hiring spree we’ve seen in the last three years. Cost pressures are easing and firms are upbeat about the outlook for export orders,” said Rain Newton-Smith, CBI chief economist commenting on the result of the survey.

According to Newton-Smith, the results reflect the “benefits from the decline in sterling for UK exporters”.

But the flipside, he added, is “the broader hit to consumer spending power across the economy from stronger inflation, which is likely to have fueled the slowdown in the economy in Q1 and is expected to pull down growth in Q2.”

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