UK manufacturers expect output to drop for first time in three years

The outlook for UK manufacturers appears gloomy after a survey revealed that output is forecast to fall – the first prediction of a decline in three years.

According to the Confederation of British Industry (CBI), expectations for manufacturing output over the next quarter dropped to -6 from +5 in October.

Of the 458 firms surveyed by the CBI 20% of manufacturers said that the level of their order books was higher than normal, while 32% said it was below normal.

Manufacturers also reported the weakest overseas demand in nearly three years. Only 11 percent reported that their export order books were above average, while 40 percent said they were below, a balance of -29% – the lowest level since January 2013.

Retail sales were 3.8 percent higher than last year and posted 0.9 percent growth in the quarter to October, despite the biggest drop in food store sales since May 2014.

“Poor export performance is weighing on the UK economy, as manufacturers are held back by a strong pound and a weakening global growth outlook,” said Rain Newton-Smith, CBI director for economics.

“While there was a slight pick-up in the headline balance in November’s CBI Industrial Trends Survey, the survey paints a generally woeful outlook for manufacturing,” said Simon MacAdam, an economist at Capital Economics.

“While we are far from upbeat about the manufacturing sector’s near-term prospects, there is admittedly a good deal of uncertainty at the moment. What is more certain is that the pace of the fourth quarter’s economic recovery will continue to rely predominantly on a strong services sector.”