Manufacturers' hopes for their export businesses are at their their lowest ebb since the 2008 global financial meltdown amid sustained Brexit uncertainty, according to the Confederation of British Industry (CBI).
The organisation's latest monthly Industrial Trends Survey said output grew slightly faster than the long-run average in the three months to January with a balance of 16 per cent saying it picked up. But this is still slower than in the three months to December, where the balance was 23 per cent positive.
Manufacturers expect much the same level of growth in the next three months.
The survey of 326 manufacturers showed optimism falling sharply, with 34 per cent of firms saying they were less optimistic about the general business situation than three months ago.
Firms are worried political paralysis over Brexit and the resulting economic uncertainty will limit their future ability to obtain new business, with their concerns at the most acute level since the aftermath of the EU referendum.
New orders inside the UK were unchanged over the past quarter, stabilising after a fall in the previous three months, which was the first decline in three years. While new export orders picked up after a fall in the three months to October, growth was “weak and well below the highs seen in mid-2018,” said the CBI.
Overall order books remained strong, with export order books particularly robust, the trade body added.
Anna Leach, CBI head of economic intelligence, said: “The manufacturing sector is clearly feeling the pinch of Brexit uncertainty, with worsening business sentiment coinciding with an ongoing reluctance to invest in new facilities, machinery, innovation and training. Notwithstanding continued growth in output, these underwhelming figures in part reflect businesses’ continuing desire for clarity."
A quarter of respondents said employee numbers were down, with only 21 per cent saying they were up, giving a minus-four per cent balance, the first negative score since October 2016.
The report follows news earlier this month that manufacturers are struggling with the worst drought of workers in 30 years, as fewer EU workers come into the country in the wake of the Brexit vote.
Car makers and other industry bodies have repeatedly pleaded with Theresa May to provide clarity on how Britain will leave the EU, after months of political indecision has left industries in limbo.
UK car sales fell for the second year running last year, according to the Society of Motor Manufacturers and Traders (SMMT), also driven by Brexit uncertainty.
Tom Crotty, director of chemicals giant INEOS and chair of the CBI Manufacturing Council, said: “The last quarter has been a challenging one for manufacturers, who are understandably bracing themselves for the frightening prospect of a ‘no deal’ Brexit. Uncertainty has sadly become the norm, and this is holding back growth and investment in the manufacturing sector.
“It is vital that the Government finds a positive solution to the current Brexit deadlock so firms can continue to compete both at home and abroad.”