UK exports decline may undermine manufacturing growth, warns CBI

While growing during the three-month period ending in October 2014, the UK manufacturing’s pace of expansion slowed as new export orders weakened, according to the latest CBI Quarterly Industrial Trends Survey.

The CBI (Confederation of British Industry) is a business organization that speaks for some 1,500 direct members as well as businesses through its trade association members, “from the perspective of their leadership.”

The 448 companies that responded in the survey said growth in orders and output volumes during the three-month period were above average. Even so, the expansion of both were the slowest for a year. The pace of growth in domestic new orders weakened marginally, while export orders fell for the first time in 18 months.

Despite weakening demand for manufactured products, the sector continued hiring new employees at a strong pace.

The survey respondents expect growth to continue during the next three months, but expectations for total new orders and exports growth have declined.

Manufacturers’ plans for investing in buildings fell to their lowest level in a year. However, plans for investment in plant & machinery, and product & process innovation continued growing strongly.

(Source: CBI)

The percentage of companies concerned that economic and political conditions overseas may undermine export orders remained well above its long-run average for the second consecutive quarter.

CBI Director of Economics, Rain Newton-Smith, said:

“It’s disappointing that a sluggish exports market has taken some of the steam out of manufacturing growth, which was going from strength to strength throughout most of this year.”

“However, growth in orders and output is expected to continue ahead, albeit with expectations moderating, and domestic orders have continued to rise at a healthy pace. And it is encouraging that job numbers are growing.”

“Nevertheless, the manufacturing sector is clearly facing headwinds. Global political instability, mounting concerns about weakness in the Eurozone and recent rises in Sterling are all weighing on export demand.”

Key findings for the next quarter

Twenty-nine percent of manufacturers forecast that new orders will increase, while 9% predict they will fall.

Twenty-seven percent expect new domestic orders to rise, while 8% anticipate a fall.

Seventeen percent predict new exports orders will grow, compared to 8% who see them falling.

Twenty-seven percent of factory bosses expect output volumes to rise, versus 8% who say they will decline.

Nineteen percent expect to be hiring more workers, compared to 12% who think employment will decrease.