24 Jul 2024


UK manufacturers most optimistic for nearly 50 years

Rain Newton-Smith: reopening has lifted the mood

Optimism among UK manufacturers improved at its fastest rate since April 1973 during the three months to April, while investment intentions saw a strong, broad-based rebound, according to the Confederation of British Industry’s latest quarterly Industrial Trends Survey.

The CBI survey of 288 UK manufacturers found that firms are expecting to increase capital expenditure on plant and machinery, product and process innovation, buildings, and training and retraining, in the coming year (relative to the last). In particular, their plans to invest in plant and machinery are at their strongest since July 1997. The most common reasons given for the expected increase in spending are to improve efficiency (cited by 66% of respondents) and to replace existing plant and equipment (cited by 63%).

Manufacturing output was broadly flat in the quarter to April, while total new orders grew at the quickest pace since April 2019. Manufacturers expect both output and orders growth to pick up rapidly in the current quarter.

Domestic orders grew at their fastest pace since July 2018 and firms anticipate this will improve further. Meanwhile, export optimism for the year ahead strengthened after successive decline for almost three years. New export orders stabilised after falling for nearly two years and are expected to hold steady in the quarter ahead.

However, cost pressures continue to temper the outlook for the manufacturing sector. In the quarter to April, the growth in costs accelerated at its fastest since April 2011, and manufacturers expect costs to grow at a similarly rapid rate during the current quarter.

The number of people employed in the sector grew at its fastest rate since April 2019 and is expected to accelerate further over the coming three months, with expectations at their strongest since April 1974.

“Manufacturers have reported the biggest increase in optimism in nearly 50 years in this month’s quarterly survey,” says the CBI’s chief economist, Rain Newton-Smith. “Phased reopening has lifted the mood among firms, notably driving orders, employment, and investment plans.

“However, rising costs are an increasing concern for many businesses, and seem to be putting upward pressure on prices as firms try to protect their margins,” she adds. “Continuing to support firms while they get on a steadier footing as restrictions ease will be crucial to recovery. The Government should continue to work closely with business to ensure reopening is a success, while boosting competitiveness over the long-term.”

Ineos group director Tom Crotty, who chairs the CBI’s manufacturing council, says: “It’s hugely welcome to see manufacturers planning to invest more in their businesses following what has been an extraordinarily difficult period for the sector. After all, a more productive manufacturing sector can be an engine for the UK’s economic renewal and long-term growth.

“As the UK gradually recovers from Covid-19,” he adds, “there is a fantastic opportunity for the government to work in partnership with manufacturers to forge a new future for the sector founded on sustainable growth and innovation.”

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