Manufacturing output stalls as export orders drop to lowest level in six months

UK manufacturing output has stalls, figures suggest.

UK manufacturing output has stalls, figures suggest. - Credit: Archant

UK factory output stalled over the three months to September after exports plunged, adding to signs of slowing growth in the UK economy, according to an industry survey.

The latest CBI Industrial Trends Survey showed the balance of firms where manufacturing production rose compared to those where output fell was unchanged in the quarter to September.

It was the first time output failed to expand over the three months to September since January 2013.

Export orders in September slumped to minus 24, the weakest level for six months, impacted by the strong pound and increasing international uncertainty.

The report added that export orders this month among small and medium-sized firms were at their lowest level since October 2009.

The total order books of manufacturing firms also fell in September to minus seven, compared to minus one last month, but was above the long-term average of minus 15.

Also, today data from the Office for National Statistics (ONS) showed borrowing - excluding the effect of bank bailouts - spiralled to £12.1 billion in August, dealing a blow to Chancellor George Osborne’s borrowing targets.

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The CBI report added that manufacturers expect the market to remain tough with a balance of minus eight anticipating prices falling over the next three months, compared to minus six in August and a long-term average of plus one.

The report added that 14 of the 18 manufacturing sub-sectors it tracks expect prices to decline over the coming three months, up from nine sub sectors last month, the highest amount since August 2009.

Many economists are concerned that the UK’s recovery is consumer-led and is unsustainable over the long-term.

CBI director of economics Rain Newton-Smith said: “Exports are the missing link in the UK recovery at the moment, with the strong pound squeezing manufacturers’ margins, even though lower commodity prices are helping to ease cost pressures.

“Meanwhile, manufacturers will have an eye on China’s slowdown and its effect on neighbouring markets.”

She said boosting export growth and innovation were “vital to improving productivity”.

Ms Newton-Smith added that the CBI wanted the Government to protect export and innovation spending, alongside other growth-boosting areas, in its comprehensive spending review in November.

IHS chief UK and European economist Howard Archer said: “The September CBI industrial trends survey will likely reinforce concern that the economy is going through a soft patch in the third quarter, although in truth the manufacturing sector has largely been struggling through 2015.”