The Confederation of British Industry’s (CBI) latest Industrial Trends Survey (ITS) shows that manufacturing output volumes in the UK decreased at the highest rate since mid-2020 in the quarter to December due to sluggish demand. According to the study, manufacturers foresee another significant reduction in output over the following three months.The total and export order books dropped considerably compared to last month, with total orders falling to their lowest level since late 2020.
Despite weak demand, manufacturers’ finished goods inventories remain quite large, reaching levels not seen since the early days of the COVID pandemic. Meanwhile, expectations for selling price inflation increased significantly in December, with the pace of inflation predicted to be comfortably above the long-run average over the next three months, according to a CBI report.
The survey found that output volumes fell in the three months to December (weighted balance of -25 percent, down from -12 percent in the quarter to November), the steepest drop since August 2020. Manufacturers expect output to fall again in the quarter ending March 2025 (-31%), with expectations lower than at any point since May 2020.
Output decreased in 15 out of 17 sub-sectors in the three months to December, with the significant fall driven by the furniture and upholstery, glass and ceramics and motor vehicles and transport equipment sub-sectors.
“Manufacturing output appears to have contracted during the fourth quarter, with conditions across the sector looking more challenging than at any time since the COVID pandemic in 2020,” said Ben Jones, the lead economist at the CBI.
“Manufacturers are facing a perfect storm of weakening external demand on the one hand, amid political instability in some key European markets and uncertainty over US trade policy” . Domestic business confidence has plummeted in the aftermath of the Budget, which increased expenses and resulted in widespread reports of project cancellations and declining orders.
“Manufacturers are entering 2025 with no expectation of short-term recovery. As firms continue to work through the challenges of the budget, the government could help support business confidence by accelerating measures that could restore some headroom for investment, such as providing flexibility to the apprenticeship levy or signalling a faster timetable to reform business rates, and working in full partnership with boardrooms to develop a long-term industrial strategy would send the right signals to markets and investors that the UK is a The survey included responses from 331 manufacturers.
