Thursday, July 9, 2020

Manufacturing output declines at record pace

According to the latest CBI monthly Industrial Trends Survey, manufacturing output volumes in the three months to May dropped at the fastest rate on survey record (since July 1975).

The survey of 385 manufacturers found that output volumes fell in 15 of 17 sub-sectors, with the headline drop in output primarily driven by the motor vehicles & transport equipment & food, drink & tobacco sub-sectors.

Total and export order books deteriorated compared to the previous month, dropping to their lowest since October 1981 and October 1998, respectively.

Looking ahead, manufacturers expect output volumes to fall at a slightly slower – but still fast in historical terms – pace in the next three months. Firms also expect output prices in the next three months to fall at the fastest pace since April 2009.

Additional questions added to the survey in relation to COVID-19 revealed that:

  • 84% of respondents had seen a negative impact on their domestic output.
  • 68% of manufacturers reported a negative impact on their international output.
  • 51% of manufacturers reported a partial shutdown/closure.
  • 59% of manufacturers mentioned that they had temporarily laid off staff, while 9% reported permanent layoffs.
  • 74% of firms had faced cash flow difficulties.

Anna Leach, CBI Deputy Chief Economist, said: “These results show that UK manufacturers are still grappling with the impact of the pandemic. Production levels have fallen even more sharply as firms experience collapsing demand and supply chain disruption, leading some to temporarily shut down their factories. The sector is bracing for what will be a challenging period.

“By continuing to show flexibility in the economic support being given to firms, the Government can ensure that the manufacturing sector can exit the lockdown with as little permanent damage possible.”

Tom Crotty, Group Director, INEOS and Chair of the CBI Manufacturing Council, said: “These are undoubtedly tough times for manufacturers, and the gloomy figures make for difficult reading.

“Despite these unprecedented circumstances, the immense efforts of firms across the UK in producing critical equipment to tackle COVID-19 have highlighted manufacturing’s status an invaluable economic sector. As such, it is important that the government continues to support firms through the current crisis and place the sector at the heart of the UK’s economic recovery.”

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