The Confederation of British Industry's (CBI) monthly net balance of new orders slipped to -29 in March, from -28 in February, well below its long-run average of -13, signaling ongoing struggles in the UK’s manufacturing sector.
UK factory orders fall further
The downturn is reflective of broader challenges facing British factories, which are grappling with rising taxes and wages in April, dampening overall business sentiment and further heightening concerns about the economic outlook. While many manufacturers are struggling, a few sectors are finding some relief, particularly those poised to benefit from an expected increase in defense spending across Europe, which has provided a welcome boost for certain industries.
Manufacturing landscape remains weak
However, the overall manufacturing landscape remains weak, as evidenced by the drop in manufacturers’ output expectations for the next three months. These expectations fell into negative territory, dropping to -2 from +8 in February, a sharp decline after reaching a three-month high just last month. CBI lead economist Ben Jones highlighted that while there is strength in sectors such as aerospace and defense, many manufacturers continue to face weak order books, indicating that the broader manufacturing environment remains under pressure.
Policies complicates situation
The situation is further complicated by concerns surrounding upcoming hikes in social security contributions and the minimum wage, which are causing many businesses to hesitate when it comes to making long-term capital investments. These changes in labor costs are prompting manufacturers to become more cautious, which in turn is dampening future investment activity. Meanwhile, export orders did improve, but they remained below the long-term average, reflecting ongoing uncertainty in international markets. While some firms are seeing modest improvements, the overall picture for UK manufacturing continues to point to a sector struggling to regain momentum amidst rising costs and economic uncertainty.
