New data reveals a severe contraction in the UK's manufacturing sector, with output falling at the most rapid rate seen since the height of the Covid-19 pandemic.
A Sector in Sharp Decline
A survey from the Confederation of British Industry (CBI) has delivered a stark warning. It found that manufacturing output in the three months to November dropped at its fastest pace since the pandemic.
The key indicator for output volumes, the weighted balance, plunged to -30 per cent. This is the lowest level recorded since the quarterly period ending in August 2020 and a significant deterioration from the -16 per cent reported in the previous three-month period.
Furthermore, the outlook remains grim. The same survey indicates that manufacturers expect output to decline at an equally sharp pace over the next three months.
Challenges and Wider Economic Impact
This industrial trends survey presents a major challenge for the Labour government, which has placed economic growth and establishing the UK as a clean energy superpower at the heart of its mission.
The situation is particularly bleak as businesses anticipate a heavier tax burden following the upcoming Budget. CBI analysts noted that both total and export order books remain well below their long-run averages.
In a sign of weakening demand, stocks of finished goods were also reported to be above what is considered adequate, although this figure did see a slight decrease from October.
Some analysts suggest this data could indicate that firms rushed investment and production earlier in the year to avoid potential tariff disruptions.
Glimmers of Hope and Calls for Action
There was a small piece of positive news for economists. Expectations for average selling price inflation eased in November and are now aligned with long-run averages.
This combination of weak growth and receding inflation pressures strengthens the prospect of the Bank of England voting for an interest rate cut in December.
However, Ben Jones, a lead economist at the CBI, emphasised that the data serves as a critical warning to the Chancellor ahead of a difficult Budget. Jones stated that manufacturers directly linked the uncertainty around upcoming fiscal measures to the slowdown in purchases and investment.
With the Budget just days away, the CBI is urging the government to provide much-needed certainty and back its pro-growth rhetoric with tangible, pro-business policies. Currently, there are few rumours from the Budget that suggest a imminent rebound for the beleaguered sector.
This survey aligns with recent weak official data. The Office for National Statistics (ONS) reported last week that production fell by 0.5 per cent in the third quarter, with a sharp two per cent drop in September alone. Part of this decline was attributed to a production freeze at Jaguar Land Rover following a cyber attack.
Business leaders have warned that further taxes risk hampering companies and depressing growth for months to come.
