Editor's PickForexUK manufacturers predicting biggest fall in growth since the depths of Covid

September 22, 2022

Manufacturers expect a sharp fall in their output over the next three months in the weakest forecasts for growth since the depths of the pandemic.

They reported a slight drop in output in the three months to September but expect a sharper decline in the next three months, according to a monthly survey of 238 British companies by the CBI, which represents businesses, and Accenture, a professional services firm.

A net balance of -4 per cent of companies said output fell in the three months to September, compared with -7 per cent the month before. A balance of -17 per cent of businesses expect output to fall at a faster rate in the next three months.

Prices will continue to rise, however, with a net balance of +59 per cent of business leaders saying they planned to increase prices in the coming quarter, up from +57 per cent last month.

Businesses have struggled to maintain their output over the past year amid supply disruptions caused by shortages of key components and lockdowns in China, which pushed up the cost of supplies. Disruptions are now easing but the high price of energy continues to eat into profit margins.

Anna Leach, CBI deputy chief economist, said: “It is clear that the downturn, which originated in consumer-facing services, has spread to manufacturing, with output falling for the second month running. When adding an uncertain demand environment to ongoing input and labour shortages, and a cost-of-doing-business crisis, the outlook looks increasingly challenging for the sector.” She added that businesses needed confidence and wealth to invest if the government’s growth plans were to work.

Separate research by Make UK, which represents manufacturers, and BDO, the business advisory firm, found that British manufacturers have significantly cut their growth forecasts.

Expectations for growth in the survey of the 354 firms within the sector, which accounted for 10 per cent of the country’s economic output last year, were revised down to 0.6 per cent in the third quarter, down from 1.7 per cent forecast in June.

Stephen Phipson, chief executive of Make UK, said: “Whilst industry has recovered strongly over the last year, the storm clouds are gathering in the face of eye-watering costs and a very difficult international environment. This threatens to shatter expectations of a sustained recovery from the pandemic and put many perfectly viable businesses at risk.”

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