UK manufacturing output expected to improve despite challenges

Based on data from the Confederation of British Industry (CBI)’s latest monthly Industrial Trends Survey on UK manufacturing, expectations for future selling price inflation rose in February, to their strongest since July 2023.

Despite this, the survey noted that selling price expectations remained well below the multi-decade high observed in 2022 (+80 percent in March 2022).

However, manufacturers expect output to rise slightly in the quarter to May, according to the data.

The 344 responding manufacturers revealed:

• Output volumes fell in the three months to February at a quicker rate compared to the quarter to January (balance of -19 percent, from -10 percent in the three months to January). Output is expected to rise slightly in the three months to May (+4 percent).
• Expectations for average selling price inflation accelerated in February (balance of +17 percent from +9 percent in January), rising above the long-run average (+7 percent). Selling price expectations were the strongest since July 2023.
• Stocks of finished goods were seen as more than “adequate” in February (balance of +11 percent from +18 percent in January).

Addressing UK manufacturing challenges     

“UK manufacturing conditions remain challenging, with lower output volumes widely reported across the sector this month,” Anna Leach, CBI Deputy Chief Economist commented.

Leach urged that as the UK Budget nears, “it is critical that the Chancellor uses this opportunity to put the country on a path to sustainable growth through further steps to incentivise innovation and investment in high-growth sectors, including in manufacturing, for example, through bringing capital expenditure within the scope of the R&D tax credits scheme.”

Results comparison from December 2023

Comparatively, in the December 2023 edition of its Industrial Trends Survey, manufacturers reported stable output volumes during the final three months of 2023. This was the first time output had not dropped since the quarter to July 2023. Manufacturers expected output to increase “marginally” in the first three months of 2024.

CBI confirmed that its Industrial Trends Survey for February 2024 was conducted between 25 January and 13 February 2024.