MNI: UK Manufacturing Weakens As Brexit Unease Ramps Up: CBI

--October CBI Total Order Book Balance -6% Vs -1% September

By Jamie Satchi

     LONDON (MNI) - UK manufacturing orders in the three months to October

contracted at the sharpest pace in the three years, according to the latest

quarterly CBI Industrial Trends Survey.

     --QUARTERLY ORDERS LOWEST SINCE OCT 2015

     The fall in order book growth, down to -6 in the three months to October

from +15 in the three months to July, was driven by sharp reductions in domestic

and export orders, taking the overall index to a three-year low and below the

long-term series average of 0.

     The volume of domestic and export orders both slipped to three-year lows

(-10 and -8 respectively) and, like the overall index, each sit below their

long-run averages.

     --BUSINESSES ANXIOUS

     In what made for a a bleak assessment of the UK manufacturing sector less

than 200 days before the UK detaches itself from the European Union, business

optimism and investment intentions also deteriorated markedly.

     Optimism regarding the business situation receded to -16 in the three

months to October, down from -3 in July and the lowest quarterly outturn since

July 2016.

     Alongside this, prospects for exports over the coming year plunged to a

six-year low, signalling heightened anxiety across firms surrounding future

trading arrangements.

     INVESTMENT APPETITE PLUNGES

     Intentions to invest over the next year relative to the previous year also

receded, with plans to invest in plant and machinery the lowest since July 2009.

     LOOKING AHEAD

     Looking ahead to the next three months, coinciding with the final stages of

Brexit negotiations, total orders were expected to weaken further. 

     The volume on new orders over the next three months balance moderated to -4

in the three months to October, a five year low. Firms were more pessimistic

about future domestic orders than export orders, with the former slipping into

sub-zero territory.

     MONTHLY FIGURES

     On the month, the total order book fell to -6, the lowest in exactly two

years, down from -1 in September. A sub-component of this, the export order book

balance, fell to -4 from +5 a month prior. Despite the losses, both indices

remain above their respective long-run averages.

     Expectations for output over the next three months fell markedly, down 22

points to -3 - below the long-run average of +9. 

     Average prices over the next three moths were expected to remain broadly

stable. The associated indicator fell three points to +10 but remained seven

points adrift of its average (+3). 

     "SOBERING" FIGURES

     "This is a sobering set of figures demanding immediate action at home and

abroad," said Rain Newton-Smith, CBI Chief Economist.

     Newton-Smith went on to add that the survey provided definitive evidence

that planned investment was indeed being "scaled back in the face of deepening

Brexit uncertainty".

     Tom Crotty, Group Director of INEOS and Chair of CBI Manufacturing Council,

said that it was no surprise that firms have started to shift from contingency

planning to action "as the likelihood of a 'no deal' Brexit increases."

     "Manufacturers will also be deeply concerned with the Government's

proposals for a post-Brexit immigration system, which, by dismissing the

importance of low-skilled labour to the economy, risks worsening skills

shortages," he added. 

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

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