UK factories suffer drop in domestic and foreign orders

Chris Papadopoullos
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Weak economic growth and currency movements have been a hindered sales of UK goods abroad (Source: Getty)

UK factories have started the year in bad shape, suffering weak sales growth at home and abroad, new survey figures reveal today.

The Confederation of British Industry's (CB) headline total order books balance dropped to a score of minus 15 in January from minus seven in December. The export order balance dropped to minus 22 from minus 18.

Manufacturers have been struggling to grow export orders due to weak growth abroad and the strength of the pound. When the pound is strong against the euro, for example, it makes British goods more expensive to consumers in the Eurozone – the UK's biggest export market.

“Uncertainty around the prospects for global growth, uncompetitive energy costs and the strength of the pound have all played their part in UK manufacturers finding conditions tough when trying to sell overseas," said CBI director of economics Rain Newton-Smith.

Yet the survey of 465 manufacturers found that firms were planning to invest more over the coming months. More firms said they were looking to ramp up investment in buildings, machinery, innovation and training. Manufacturers, on balance, expect a rebound in both domestic and foreign orders over the next three months.

"The January CBI survey exhibited further signs of the weakness in orders that developed within the manufacturing sector during 2015, but gave little sense that momentum deteriorated further at the start of the year – indeed several of its forward looking activity readings actually improved while business optimism rose to move back in line with its average," said Allan Monks, an economist at JP Morgan.

The pound climbed as high €1.42 last year, but has rapidly fallen back over the last two months and currently sits at €1.32.

Official figures from the Office for National Statistics showed that manufacturing output had dropped 1.2 per cent in the 12 months to November.

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