'Challenging' outlook for UK manufacturers as output falls sharply
Manufacturing output volumes fell at a sharp pace in the quarter to August, after being broadly flat in July, according to the CBI’s latest Industrial Trends Survey (ITS).
Based on the responses of 311 manufacturers, the survey also found that manufacturers are expecting output to fall again over three months to November.
Output decreased in 14 out of 17 sub-sectors in the three months to August, with the fall in output being driven by the chemicals, paper, printing & media, and metal products sub sectors.
Ben Jones, CBI lead economist, said: “Manufacturers report that rising costs are squeezing margins and leaving customers more cautious, which in turn is hitting orders and weighing on output.
“With weak demand compounded by trade frictions and policy uncertainty, the outlook for UK manufacturers remains challenging.”
Expectations for average selling price inflation eased in August. This came after August’s expectations were the weakest since October 2024.
Businesses also highlighted that stocks of finished goods were more than adequate in August, though stock adequacy was below the long-run average.
Meanwhile, expectations for selling price inflation eased relative to July, with the expected pace of growth in selling prices over the coming quarter the weakest since October and around its long-run average.
Total order books were reported as below normal, while export order books weakened, and both balances were far below their long-run averages.
Mr Jones added that the upcoming Autumn Budget will be “pivotal” for businesses.
He said: “As firms continue to cite, they are contending with a range of cost pressures from high energy costs to the additional burden from last year's Autumn Budget increase in employer national insurance contributions.
“Against this backdrop, the upcoming Autumn Budget is a pivotal moment to shore up business sentiment.
“The government must provide business tax certainty and further Growth and Skills Levy flexibility, accelerate industrial and infrastructure strategy implementation, and broaden support to tackle uncompetitive energy prices.
“The CBI stands ready to partner with the government to co-design the policies that will build a truly competitive, innovative, and prosperous UK economy.”
The data comes after a report from S&P Global found earlier this week that business activity across the UK’s private sector had hit a one-year high this month, as the services industry led a summer rebound, according to new survey data.
The S&P Global flash UK composite purchasing managers’ index also found that in the UK’s manufacturing sector, output continued to decline this month, and firms recorded the sharpest decline in new work since April.
Furthermore, total workforce numbers decreased for the 11th month in a row in August, according to the PMI survey.
Businesses surveyed have been cutting staffing levels or slowing the pace of hiring in response to greater cost pressures.
Input cost inflation rose to the highest rate since May, reflecting higher prices such as for food, transport bills, and international shipping.