UK manufacturing orders stay near pandemic lows as cost pressures rise
British manufacturers are facing a prolonged demand slump in July, with order books remaining at one of their weakest levels since the COVID-19 pandemic. The latest survey also indicates that rising costs are tightening margins and adding pressure to investment and employment across the sector.
Highlights
- The Confederation of British Industry's monthly order books balance remains at -45 in July, matching its lowest level since September 2020.
- Unit costs for UK manufacturers rose at their fastest rate since October 2022 during the three months to July, intensifying margin pressures.
- Output expectations improved marginally to -30 in July from -31 in June, but manufacturers still anticipate subdued activity in the near term.
July survey signals deeper strain on factories
As reported by Reuters, citing the Confederation of British Industry, its monthly order books balance holds at -45 in July, matching its joint-lowest reading since September 2020 and pointing to continued weakness in manufacturing demand.The business lobby group's quarterly figures also show cost pressures rising rapidly in the three months to July, with unit costs increasing at the fastest pace since the three months to October 2022.
Ben Jones, the CBI's lead economist, says manufacturers are being squeezed from both sides as costs continue to climb while weak demand limits their ability to raise prices. He says firms are absorbing the pressure through shrinking margins, weaker investment and further cuts to employment.
Industrial competitiveness moves into focus
Jones says that if the new administration is serious about re-industrialising Britain, restoring industrial competitiveness must be among its first priorities.Despite the broader weakness, the monthly data show output expectations for the next three months improving slightly to -30 in July from -31 in June. The reading still indicates that manufacturers expect activity to remain subdued even as the outlook edges up marginally.
Our earlier coverage of the UK’s June inflation slowdown explained how headline CPI eased to 2.6%, alongside softer private-sector wage growth, reducing immediate pressure on the Bank of England to raise rates and strengthening expectations for a hold with an eye to potential cuts. It also highlighted that the relief could prove temporary if energy prices rise again, with higher European gas costs flagged as a key risk that could push inflation back up and squeeze real incomes.
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