UK manufacturers report steep fall in output

Output from UK manufacturers is falling at its fastest rate since September 2020, the UK’s largest business group has said.

This fall was largely attributed to sectors including mechanical engineering, food and drink, tobacco, paper and printing & media, the Confederation of British Industry (CBI) said.

The survey, which was based on the responses of 220 manufacturing firms, also found that selling price inflation is expected to accelerate slightly in the next three months although below the record high reached earlier this year.

The volume of goods and services produced by factories fell by 9 per cent in the three months to December – a steep drop from the 18 per cent rise in output reported in the previous three months to November, and means it contracted at the fastest pace since September 2020.

Anna Leach, CBI deputy chief economist, said: “The corrosive effect of higher inflation on demand is increasingly clear, as manufacturing output contracting at the fastest pace in two years over the last quarter.

“While some global price pressures have eased in recent months, cost and price inflation will likely remain very high in the near term, with rising energy bills a key concern for manufacturers.

“Government support for energy costs has been considerable already, buying time for businesses to adapt to Europe’s new energy landscape. And with the UK economy set to be in recession through much of 2023, there remains a strong case for further support in the coming year.”

In October, Office for National Statistics figures showed that the number of UK manufacturing businesses shrank by 10 per cent in 2021, while turnover also fell by 9.2 per cent.

Compared to previous years, companies faced tougher conditions in 2022 in both domestic and export markets.

Many organisations reported instances of expected orders being postponed or cancelled, due to factors such as rising uncertainty, high transportation costs, longer lead times, inflationary pressure and the cost-of-living crisis.

In addition to falling orders, the manufacturing sector could have also been affected by severe labour shortages in the UK.

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