British manufacturing order growth wobbles despite continued export strength

 
Jasper Jolly
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Mixed signals for British manufacturers (Source: Getty)

Orders for the British manufacturing sector softened in the three months to October, with growing signs of nerves for the coming quarter, according to a survey published today.

A negative balance of two per cent of firms reported order books were above normal, representing a sharp drop from the 10 per cent balance found in July, according to the survey of almost 400 firms by the Confederation of British Industry (CBI).

The survey reveals new orders continued their downward trend after peaking in April, with a balance of only six per cent of firms saying orders were up – a steep decline from the 25 per cent found in April.

Read more: Manufacturers receive 'welcome' boost but services outlook flat

However, a balance of 14 per cent of UK manufacturers said output was up over the past three months, well above the long-run average of two per cent. Exporters continued to show orders well above average, although those gains moderated

The survey illustrates a mixed picture for the sector. Rain Newton-Smith, CBI chief economist, said: “Growth in output and orders are still above historical norms, and it’s encouraging that plans for spending on innovation and training are holding their own.

“But we’ve seen a general softening in manufacturing activity over the past three months, with the outlook for investment becoming more subdued.”

Investment intentions fell across the board, with plans for investments in buildings falling to their lowest since 2009.

Read more: The pound edged up after UK industrial production smashed expectations

Businesses’ plans for investment may be held back by falling optimism concerning the business situation, which decreased steeply from a positive balance of five in July to a negative reading of 11, the lowest since a plunge in confidence following last year’s referendum on leaving the EU.

The outlook for the UK manufacturing sector is “mixed”, according to Howard Archer, chief economic adviser to the EY Item Club.

He said: “On the export side, a very competitive pound and healthy global demand are helping UK manufacturers competing in foreign markets.”

However, weaker economic fundamentals on the home front as well as political uncertainty are “testing” firms’ investment intentions, he added.

Read more: Slowing manufacturing output holds back UK economy

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