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Optimism Rising
UK manufacturers are more optimistic about their business situation and exporting prospects , while reporting strong growth in domestic orders over the previous quarter , according to the latest quarterly CBI Industrial Trends Survey .
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THE SURVEY OF 461 manufacturers reveals that the volume of domestic orders rose at the fastest pace since July 2014 in the three months to January , while export orders continued to grow , but below expectations . Headcount edged higher having dipped for the first time in more than six years in the last quarter .
Demand is expected to grow strongly over the next three months , driven by both domestic and export orders , while production is also expected to advance briskly – expectations for output growth are also the highest since July 2014 .
Concerns persist over access to skilled labour , however , with almost a quarter of respondents – the highest since July 1989 – observing that skilled labour availability could limit output over the next few months .
Sterling ’ s depreciation continues to impact prices as unit costs rose at their highest pace in over five years , amid expectations that this will intensify over the next quarter . But on the flip side , manufacturers continue to see the competitive benefits arising from sterling ’ s weakness , reporting a further strong rise in competitiveness within the EU and putting the rise in competitiveness in non- EU markets at a survey high .
The pick-up in output has meanwhile eaten into spare capacity , pushing the proportion of firms citing capacity expansion as an investment driver to a survey high . Firms are planning to increase investment in product & process innovation and training & retraining over the year ahead at the fastest pace in two years , while investment plans for building and plant & machinery have moved back above their long-run averages .
Rain Newton-Smith , CBI Chief Economist , said : “ UK manufacturers are firing on all cylinders right now with domestic orders up and optimism rising at the fastest pace in two years .
“ The weaker Pound is driving export optimism for the year ahead , but is having a detrimental impact on costs for firms and ultimately for consumers .
“ The new Industrial Strategy can support our manufacturing base by offering a shared long-term vision for the key sectors and regions of the economy and evidence-based plans for government and business collaboration . The CBI and its members across the country stand ready to support the Government in achieving this .”
KEY FINDINGS – PAST QUARTER :
• Domestic orders rose at their fastest pace (+ 16 %) since July 2014 (+ 23 %). Export orders rose more moderately (+ 5 %), and below expectations (+ 17 %)
• 37 % of businesses reported an increase in total orders , and 21 % a decrease , giving a balance of + 16 %
• 32 % of firms said the volume of output over the past three months was up and 18 % said it was down , giving a balance of + 15 %
• 22 % of manufacturers said employment numbers were up , and 18 % said they were down , giving a balance of + 4 %
• 27 % of firms said they were more optimistic about the general business situation than three months ago and 12 % were less optimistic , giving a rounded balance of + 15 % – the highest since January 2015 (+ 15 %). Optimism about export prospects for the year ahead rose strongly (+ 19 %)
• Firms competitiveness in the EU rose strongly again (+ 28 %) while their competitiveness in non-EU markets rose at the fastest pace in the survey ’ s history (+ 26 %)
Rain Newton-Smith
• Average domestic prices continued to grow at an above average pace (+ 9 % vs -3 %) for the third quarter in a row , while average export prices rose strongly (+ 16 % vs LR average of -9 %).
• The proportion of firms working below capacity ( 46 %) was at its lowest since April 2015 ( 44 %)
• Manufacturers intend to increase spending on product and process innovation strongly over the year (+ 27 %) and a higher rate level than in the previous quarter , while spending on training and retraining also continued to grow robustly (+ 27 %).
• The number of firms citing access to skilled labour as a factor likely to limit output ( 24 %) was at its highest since July 1989 ( 24 %).
LOCKSMITHJOURNAL . CO . UK | JAN / FEB 2017 Sponsored by Burg-Wächter