Record UK manufacturing slump continues but optimism grows
The decline in UK manufacturing orders eased somewhat in July but the sector remained mired in its deepest downturn on record, according to a closely watched survey.
The CBI industrial trends survey’s gauge of total orders rose to minus 46 in July from minus 58 in June. That was its highest reading since March but lower than analysts were expecting. And it was also still well below the long-term average.
UK manufacturing showed little sign of escaping from its current slump, with output falling at its sharpest pace rate since at least 1975 in the three months to July.
The CBI’s gauge of output fell to minus 59 in the three months to July from minus 57 in the quarter to June.
Rain Newton-Smith, CBI chief economist, said: “Manufacturers continue to face extreme hardship due to the Covid-19 crisis.”
“There are tentative signs of gradual recovery on the horizon, with firms expecting output and orders to begin to pick up in the next three months. But demand still remains deeply depressed.”
UK manufacturing firms become more optimistic
Despite the slump in output, firms were upbeat about the chances of increasing production over the next three months. The survey’s measure of output expectations hit its highest since January 2018.
It was the third month in a row when a new record fall was set in a sign of the unprecedented toll coronavirus is taking on the UK economy.
The government has gradually lifted the coronavirus lockdown over the last two months. Prime Minister Boris Johnson encouraged factories to go back to work in mid-May and shops, restaurants, and pubs are all now allowed to open.
However “firms remain very concerned about their financial situation and their capacity to invest,” said Newton-Smith.
“It is crucial for the government to consider how it can continue to support viable firms through this crisis.”
Over the last three months the motor vehicles and transport, food, drink and tobacco, and mechanical engineering sub-sectors have slashed output at the fastest rate.
Employee numbers fell at their fastest pace since 2009 in the three months to June. However, the CBI industrial trends survey said it was unclear whether companies were including furloughed employees in this count.