UK manufacturers see output slide - CBI

Output has fallen across the manufacturing sector, a closely-watched survey suggested on Wednesday, weighing heavily on sentiment.

According to the latest Industrial Trends Survey from the Confederation of British Industry, output volumes fell in the three months to January, with the weighted balance sliding to -10 from 0 in December.

Output fell in 13 of the 17 sub-sectors, driven by chemicals, motor vehicles and transport equipment, metal products and building materials.

Respondents did expect volumes to rise slightly in the coming three months, with a balance of 7. But new orders were expected to stagnate, with a balance of -1.

The volume of total new orders also fell at its fastest pace since July 2020, at -13 compared to 2 in October. Both export and domestic orders saw "steep declines", the CBI noted.

The total orders balance was -30, down from -23 in in December and below consensus for no change.

Investment intentions in product and process innovation declined from 6 to -5, the weakest since January 2021.

Anna Leach, deputy chief economist at the CBI, said: "Conditions in the manufacturing sector deteriorated unexpectedly at the start of the year.

"Uncertainty about demand looks set to weigh on investment in the year ahead.

"Manufacturers are also facing potential disruption to their global supply chains in the near term because of the diversion of commercial shipping away from the Red Sea. This is likely to push up the price of some imported inputs at a time when firms are still absorbing the costs of higher energy bills and a still-tight labour market."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The downturn in the manufacturing sector is showing no signs of abating, even though the wider economy is beginning to strengthen.

"Granted, the total orders balance is not seasonally adjusted, and usually falls sharply at the start of the year. Nonetheless, our seasonally-adjusted version of the orders balance dropped to -28 in January from -26 in December, taking it further below its 2019-2019 average.

"This year looks set to see a further erosion of the UK’s meagre manufacturing base."