Thursday 21 May 2020 11:49 am

UK factories suffer biggest drop in output on record, survey shows

Manufacturing output plunged at the fastest pace since at least 1975 in the three months to May, a survey has shown, as more than 80 per cent of the UK’s factories were hit by the coronavirus lockdown.

The CBI’s industrial trends gauge, based on a survey of more than 800 manufacturers, plunged to minus 51 in May from minus 21 in April. That was the lowest score since the survey began 45 years ago.

It came after survey data from IHS Markit showed that the UK private sector remained locked in a downturn in May, despite the government easing some lockdown measures. Economists said the road to a full recovery is likely to be long and painful.

The CBI survey showed little optimism about the lifting of restrictions, however. The government has laid out a “roadmap” that has already seen some previously closed factories restart operations.

“Manufacturers expect output volumes to fall at a slightly slower – but still fast in historical terms – pace in the next three months,” the CBI said.

Firms also think prices will fall at the fastest rate since the recession of 2009. Data this week showed that UK inflation slipped to 0.8 per cent in April, its lowest in four years. The drop came as energy prices and demand plunged.

More than 50 per cent of manufacturing firms said they had partially shut down in the three months to May. More than 80 per cent said coronavirus had taken a toll on their business. Meanwhile, 74 per cent reported cashflow problems.

More than two-thirds of firms had laid off workers, with 59 per cent saying the cuts were temporary and nine per cent saying they were permanent. The UK’s job retention scheme has supported employers and workers. More than 7m workers having been “furloughed”.

“These results show that UK manufacturers are still grappling with the impact of the pandemic,” said Anna Leach, CBI deputy chief economist.

“Production levels have fallen even more sharply as firms experience collapsing demand and supply chain disruption, leading some to temporarily shut down their factories,” she said. “The sector is bracing for what will be a challenging period.”