UK manufacturing sector positive but pressure is mounting

Output from the UK's manufacturing firms surged in December, according to the latest figures from the Confederation of British Industry.

Order books display the strongest levels of growth since 1988, with the past month building on the strong performance noted in November.

However, expectations for the early part of 2018 are not as bright, with the CBI suggesting that growth with subside.

With 28% of manufacturers saying that order books are above normal levels, and just 11% reporting them to be below, the balance of +17 points represents the joint highest recorded.

It is also significantly above the long-term average, which is recorded at -14 points, with the transport equipment, motor vehicles and mechanical engineering sectors all showing strong growth.

Figures from the Office for National Statistics meanwhile shows that manufacturing grew by 1.1% in the third quarter, compared to growth across the whole economy of 0.4%.

The poor performance of the pound against other currencies has helped to boost order books, although manufacturers have reported greater inflationary pressure.

Output costs are expected to rise at their fastest rate since June 2017 across the next three months while stocks of completed goods were down – only the eleventh time in 42 years of the CBI survey that more manufacturers have reported inadequate stock levels than adequate.

Chief UK Economist of Pantheon Macroeconomics, Samuel Tombs, said it 'suggests that manufacturers are running at full capacity' and that ramping up production to meet higher demand would not be easy.

The intensity of cost pressures means that manufacturers will likely need support in 2018 in order to meet the level of predicted demand – the Government's Industrial Strategy should go some way to providing this.

Uncertainty relating to the outcome of Brexit negotiations has hit investment intentions in the sector too.

For assistance with refinancing or with overcoming financial difficulty, manufacturing firms should seek appropriate advice from corporate recovery practitioners at the earliest opportunity.


By Phil Smith


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