Manufacturing output falls as skills worries highest since 1973
By David Wood | 26th October 2022
UK manufacturers have reported a further fall in output in the three months to October, but expect production to pick up in the coming quarter.
The CBI's latest quarterly Industrial Trends Survey found that costs growth remained exceptionally strong.
The share of firms citing worries about access to skilled labour reached a 49-year high, with business sentiment falling for a fourth consecutive quarter, and at the fastest rate since the early days of the covid pandemic.
The survey, based on the responses of 279 manufacturing firms, found:
- Output in the three months to October fell slightly, and at a similar pace as in the quarter to September (balance of -4 per cent from -4 per cent). However, firms expect output to increase slightly in the next three months (+7 per cent). Output fell in 11 of 17 sub-sectors, with the overall decline driven largely by paper, printing & recorded media and metal manufacturing.
- The share of firms citing a shortage of skilled labour as a factor likely to constrain output over the next three months reached its highest level since October 1973 (49 per cent, from 39 per cent in the quarter to July). The proportion of firms citing materials/components availability as a constraint on output fell for the second successive quarter (54 per cent, from 63 per cent in the quarter to July and 71 per cent in April, which was the highest reading since 1975).
- New orders fell in the quarter to October (balance of -8 per cent compared to +11 per cent in the quarter to July), reflecting a decline in domestic orders (-8 per cent from +7 per cent) and the quickest fall in export orders since the quarter to July 2020 (-18 per cent from -2 per cent). Manufacturers expect a similar contraction (-10 per cent) in new orders over the next three months.
- Business sentiment fell for a fourth successive quarter, and at its fastest rate since April 2020 (balance of -48 per cent from -21 per cent in July).
Alpesh Paleja, CBI lead economist, said: "It's a tough time for manufacturers. Price pressures remain acute, availability of materials is still a big issue - and it is 49 years since manufacturing firms were this worried about being able to find workers with the skills they need. It's really no surprise that sentiment has deteriorated further.
"Action to address the skills challenge is critical for the sector's future prospects. Urgent reform to add flexibility to the Apprenticeship Levy would be an important first step for the new Prime Minister, which can rebuild confidence for manufacturers and restore momentum to their investment and growth ambitions."
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