UK manufacturers more positive, but investment intentions weaken, CBI says

Britain's manufacturers grew more positive over the latest quarter, but investment intentions weakened as more companies complained of higher finance costs, a business lobby group said.

Indeed, the share of firms citing financing costs as a barrier to investment reached its highest level since 1991.

The Confederation of British Industry's business sentiment index improved to a balance of +6% for the three months ending in July.

That compared to -2% in April.

The main barrier to investment, as per 40% of manufacturers, was uncertainty around demand, CBI said, with inadequate net returns next on the list of worries at 35%.

Availability of internal finance and the cost of finance, at 24% and 15%, respectively, both hit their highest level since the three months to July 2020.

Export optimism for the next 12 months improved to +5% from from -17%.

However, the diffusion index for total new orders worsened to -6% from -3%.

On the prices front, growth in domestic selling prices slowed even as average cost growth accelerated.

CBI Lead Economist, Ben Jones, said: "While there are reasons for optimism among manufacturers this quarter [...] cost pressures remain acute and there are worrying signs that a squeeze on margins and higher finance costs are now hitting investment plans."

For his part, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, chipped in saying: "We doubt that demand for manufactured goods is as strong as the CBI’s survey suggests.

"[...] Note too that, while the CBI’s quarterly business optimism balance increased in Q3 to its highest level for two years, the investment intentions balance dipped to a two-an-a-half-year low of -1, from +14 in Q2.

"Manufacturers, therefore, clearly aren’t planning for demand to pick-up much over the next year."