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British manufacturers 'expect export orders to tail-off'

Jan 23
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British manufacturers 'expect export orders to...

Although British-based manufacturers experienced growth in new domestic orders in the three months ending in January, many are expecting exports to dwindle in the next quarter, according to a new report.

The 'Quarterly Industrial Trends Survey' from the Confederation of British Industry (CBI) noted a rise in the volume of new orders, driven by a strong demand at home and modest growth in exports.

Manufacturing output climbed at a similar pace to previous quarters, but the CBI highlighted the fact that costs and charges fell, with unit prices edging down for the first time in an astonishing 12 years. Furthermore, average domestic deflation is at its fastest rate since 2010.

According to the report, the number of people employed in the sector continued to grow at a consistent pace.

Many of the survey's 467 respondents are expecting export orders to be flat in the coming three months, which will act as a drag total order growth, while domestic commissions are set to rise even further, but at a slower pace than previously seen. The CBI expects output to continue growing at a modest pace.  

However, the report suggests that access to skilled labour and capacity constraints will be key factors in limiting output in the next quarter, with a significant number of those polled expecting price competition to limit export orders.

Despite this, firms appear to be more positive about their general business situation compared to three months ago. Looking at the year ahead, manufacturers are intending to invest in plants and machinery, while plans for spending on product and process innovation, and training/retraining remain strong.

Rain Newton-Smith, director of economics at the CBI, believes that British manufacturers are heading along the right path.

He said: "Exports have grown modestly, but there is a feeling that we will not see a repeat in the next quarter, especially with the Eurozone still treading water and battling deflation.

“Falling oil prices should be positive for the UK economy overall, benefiting households and lowering costs for firms, although North Sea oil producers are being hit. With overall cost pressures contained as a result, it's no surprise to see average domestic prices in the manufacturing sector falling at the fastest rate for five years.”

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