UK factory output sees worst quarter since financial crisis

The UK's factory output has fallen at the fastest pace in a decade during the three months leading up to last week's general election, underlining the economic challenges facing the Boris Johnson government, which returned to power with an 80-seat majority.

The Confederation of British Industry (CBI) has reported that manufacturing output has fallen from -9 to -16, its weakest since September 2009 and that export orders have fallen at the fastest rate since the financial crisis. Only six of the CBI's 17 sub-sectors had reported any expansion.

The CBI also reported that inflows of new work have deteriorated and the monthly order book balance fell from -26 to -28.

The fall in output has been primarily due to the automotive sub-sector. Several car makers held shutdowns in November as insulation against the possibility of the UK crashing out of the European Union on October 31st - the third deadline Brexit, now extended to January 31st.

The CBI said: "Manufacturing activity worsened in December, finishing off what has been a generally difficult year for the sector following the stockpiling boost in Q1 2019. Output volumes in the three months to December fell at their quickest rate since the financial crisis. Export order books worsened noticeably, while total order books remained similarly weak to November, and both remain considerably weaker than their respective long-run averages.Meanwhile, stocks of finished goods rose further above “adequate” levels. Looking ahead, manufacturers expect output to fall at a slower pace."

The CBI surveyed 289 manufacturers and covered from November 22nd to December 11th - just before Johnson's comprehensive election victory.

CBI deputy chief economist Anna Leach said: “With manufacturers reporting that output is declining at a pace not seen since the financial crisis, alongside another month of softer order books, it is crucially important to rebuild business confidence in this sector."

“After three years of gridlock, the Prime Minister now has a clear mandate to govern. Businesses across the UK will want him to break the cycle of uncertainty,” she continued.

Other surveys have also pointed to Britain's manufacturers struggling in recent months, partly due to a global drop in demand, but also due to the uncertainty of the election and Brexit.

Tom Crotty of chemicals giant INEO told The Guardian: “These disappointing figures are reflective of the widespread weakness in the global manufacturing sector and the impact of continued Brexit uncertainty in the run-up to the General Election."

“Following the General Election, manufacturers will be eager to see the Prime Minister break the cycle of Brexit uncertainty as a priority. There is also a fresh opportunity for the sector to work with the government to solve long-term challenges such as raising productivity, addressing skills shortages, improving sustainability and tackling climate change,” he added.

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