Automotive industry weighs down UK manufacturing output - CBI

UK factory output continued to fall in the quarter to October, driven largely by a significant decline in the automotive industry, according to a new CBI survey.

Business optimism has taken a significant hit, falling at the fastest rate since July 2016, and optimism about exports for the year ahead deteriorated to the greatest degree in 18 years.

Investment intentions have also worsened, with plans to spend on buildings, plant & machinery and training & retraining at their most negative since the financial crisis.

Brexit uncertainty weighed heavily on export prospects, with the proportion of firms citing political/economic conditions abroad as a factor limiting exports over the next quarter hitting a survey record high. Additionally, the share of firms citing quota and license restrictions as a factor limiting exports was at its highest since July 1983.

While new orders fell at largely the same pace as the previous quarter, firms expect them to fall at a faster pace in the three months to January. Manufacturers did not report a sharp increase in stocks ahead of the October 31st Brexit deadline and don’t expect them to rise again in the three months to January.

Quarterly headcount was down, falling at its fastest since April 2010, with firms anticipating an even sharper decline the following quarter – with expectations at their lowest since the financial crisis.

Rain Newton-Smith, CBI chief economist, said: “This quarter’s findings paint a worrying picture for the manufacturing industry. A combination of Brexit uncertainty and weaker global growth are clearly hitting sentiment and export prospects, with job prospects at their weakest since the global financial crisis.

“Finding a resolution that avoids a no deal Brexit will give firms the confidence they need to step-up investment in people, growth and innovation. But for long-lasting prosperity we need an ambitious free trade agreement which provides tariff-free access to our largest trading partner for our manufacturers right across the country.”

“With Brexit reaching a critical crossroads, these gloomy results are unsurprising yet still very concerning,” said Tom Crotty, group director of INEOS and chair of CBI Manufacturing Council. “Most tellingly, manufacturers’ investment intentions across buildings, machinery, and skills are at their worst since the dark days of the financial crisis.

He added: “Manufacturers will be closely watching developments in Brussels and Westminster over the coming days and hoping that policy makers can avert a disastrous no-deal exit. If they fail, then we could be looking at a far gloomier outlook for our sector in the coming months.”

CBI www.cbi.org.uk