UK manufacturers' optimism dips slightly in July: CBI survey

Nevertheless, manufacturers hold a positive outlook, expecting the strongest output growth since March 2022 over the next three months.

The quarter to July saw output volumes remain broadly unchanged with a weighted balance of -3 per cent compared to a slight increase in the previous three months at +3 per cent. Expectations for the next quarter are optimistic, with a forecast growth balance of +25 per cent, marking the highest since March 2022. Out of 17 sub-sectors, six reported growth, as per the CBI survey.

Total new orders fell in July, continuing the trend from the previous quarter with a balance of -9 per cent from -6 per cent. While domestic orders dropped by -15 per cent from -6 per cent, export orders remained stable at +3 per cent from -14 per cent. Manufacturers expect new orders to stabilise in the upcoming quarter. After a brief uplift in April, business sentiment dipped again in July with a balance of -9 per cent from +9 per cent. Export optimism remained flat at 0 per cent after a positive shift last quarter from +6 per cent.

Investment plans for the year ahead showed improvement. Notably, investment in product and process innovation hit a peak since January 2022 at +18 per cent from +15 per cent, and investments in training & retraining increased to +7 per cent from +1 per cent, and plant & machinery to +6 per cent from +2 per cent. However, investment in buildings is projected to decline to -11 per cent from -3 per cent. Average costs surged in the quarter to July to +52 per cent from +39 per cent, with expectations of continued but slightly reduced cost growth at +36 per cent in the next quarter. Both domestic prices at +15 per cent from +10 per cent and export prices at +22 per cent from +9 per cent increased, though they are expected to decelerate in the following three months to +2 per cent and +6 per cent, respectively, as per the survey

Employment levels remained unchanged in the quarter to July, following a decline in April with a balance of 0 per cent from -6 per cent. A moderate rise in employment is anticipated over the next three months at +16 per cent.

Ben Jones, CBI lead economist, said: “Sentiment among manufacturers has cooled a little over the past few months, as output growth consistently underperformed expectations. But the near-term outlook for the sector remains positive amid an ongoing recovery in the wider UK economy.

“Manufacturers appear confident that output growth will pick up in the quarter ahead, with expectations the strongest in over two years. Firms are looking to increase stock levels to meet expected demand. And the share of manufacturers working below capacity has fallen sharply over the last quarter, feeding through to a more positive outlook for both hiring and investment.

“Last week’s Kings Speech, with welcome measures to reform planning and speed up approvals for major infrastructure projects, has the potential to give businesses the confidence they need to grow, invest and drive economic growth. And as the economy picks up steam, firms will want to see a relentless focus on delivery from the new government, to turn proposed measures into swift and bold action.”

The survey, encompassing responses from 257 manufacturing firms, highlights a complex landscape of challenges and optimism within the UK manufacturing sector.

Fibre2Fashion News Desk (KD)