Sharp fall raises fears over UK manufacturing

The recovery in British manufacturing has stumbled, with factory orders falling at the sharpest rate since April and optimism reaching a 14-month low.

The United Kingdom’s employers’ organisation the Confederation of British Industry’s (CBI’s) monthly manufacturing survey showed the orders balance dropped to 28 this month from 17 in September.

Export orders fell at the fastest rate since February, with that balance at -21 from -5 in September.

The balance is the difference between the percentage of manufacturers reporting an increase or above-normal orders and those reporting a decrease or below-normal orders.

The CBI’s quarterly survey, which was conducted in parallel, showed a sharp worsening in business optimism, to the lowest levels since July 2009.

Cost pressures show no signs of abating, putting further pressure on manufacturers’ profit margins.

Samuel Tombs at Capital Economics said the numbers suggest the manufacturing recovery is built on fragile foundations.

“Of particular concern is the sharp fall in the export orders balance, suggesting that the lower pound is still struggling to provide much support to the export-focused sector,” he said.

“Sensing the gloomier outlook, firms have also become much less optimistic about the future. Overall, then, the CBI’s survey adds to the growing weight of evidence suggesting that the overall recovery could fade quite sharply in the months ahead.”

Howard Archer at IHS Global Insight echoed those comments, saying: “There are some worrying developments in the survey that will do little to ease fears that manufacturing activity is faltering appreciably after a robust first half of the year.

“The concern is that manufacturers will see softer growth in the coming months as stock rebuilding winds down, tighter fiscal policy increasingly weighs down on domestic demand and slower global growth hits foreign demand for UK products.” —

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