|British Prime Minister David Cameron hosted a meeting of business ambassadors in Downing Street with Trade and Investment Minister Lord Green, former chairman of HSBC Bank, to discuss how the government can boost Britain’s export market, Jan 10, 2011.|
The UK manufacturing recovery is firmly on track
and looks set to continue, the business body, the CBI said today. Strong domestic and
export orders growth has boosted factory output. But inflationary pressures
continue to intensify as companies pass on the burgeoning cost of raw
materials by raising the price of goods at the factory gate, according to
the UK’s leading business group.
Of the 451 manufacturers that responded to the
April Quarterly Industrial Trends Survey, 36% said they had seen an increase
in output in the last three months, while 15% said it had fallen, giving a
rounded balance of +20%. This was driven by strong growth in both domestic
(+15%) and export (+24%) orders, with the rates of growth at their fastest
since April 1995 (+17% and +34% respectively).
Demand and production are expected to continue
rising over the next three months. Companies predict that output growth will
be sustained at a similar pace to this quarter (+22%). At the same time,
manufacturers expect domestic and export orders to continue to increase over
the next quarter (+11% for both), at rates well above their long-run
Output has also been boosted by rapid restocking
over the past quarter. Companies have built up inventories of raw materials
(+13%), work in progress (+10%) and finished goods (+17%) to the greatest
degree since July 1979 (+13%), January 1995 (+10%) and July 1977 (+19%)
In line with the ongoing recovery in the sector,
manufacturers took on more staff for the third quarter running. The net
number of companies saying that they had added to their workforces in the
last three months (+15%) was the highest since January 1974 (+21%). The
outlook for employment over the next quarter is also positive, with a
balance of +7% of firms expecting to recruit.
But alongside robust growth in activity,
companies’ production costs have risen rapidly during the last quarter. A
balance of +53% said average unit costs had gone up, the highest since
October 2008 (+56%), and a further acceleration on significant cost rises
already experienced over the past year. As a result, manufacturers have
driven up domestic and export prices rapidly (+29% and +30%), with the rates
of inflation the strongest since April 1995 (+29%) and April 1985 (+34%)
Inflationary pressures show no sign of receding
over the coming quarter, with firms expecting costs and prices to increase
sharply again over the next three months (a balance of +43% for average unit
costs, +36% for domestic prices, and +25% for export prices).
John Cridland, CBI Director-General, said:
“The manufacturing recovery remains firmly on track. Strong demand at home
and abroad and rapid restocking over the past quarter have led to another
solid rise in production, with growth expected to continue over the next
“It is also good news that manufacturers are
continuing to take on more staff to handle the increased workload.
“But production costs have jumped markedly
during the last three months, rocketing ahead after a full year of already
rapid cost inflation. This is unsurprising given the recent surge in oil and
other commodity prices.”
Manufacturers have also reported a further
tightening in capacity pressures. 29% of firms expect plant capacity to be a
likely constraint to output over the next three months, the highest since
October 1988 (29%). As a result 46% of companies plan to invest to expand
their capacity during the next twelve months, a survey high (October 1979).
Investment intentions on the whole remain
strong. In particular, firms plan to spend more on plant and machinery (+7%)
and product and process innovation (+28%) during the coming year relative to
the previous twelve months.
Monthly data from the survey showed 21% of
manufacturers said that total order books were above normal, while 31% said
that they were below. The resulting rounded balance of -11% is down on March
(+5%), but is still above the long-term average. Overseas demand in April
remains well above the average also, a balance of -6% on export order books,
albeit weaker than in March (+5%).
Lai Wah Co, CBI head of Economic Analysis,
said: “Perceptions of order book
levels have dipped in the monthly data, but the readings are still well
above the long-run average. The quarterly questions show that manufacturing
orders have risen strongly over the past three months and output growth
The April 2011 CBI Industrial Trends Survey was
conducted between 23rd March 2011 and 11th April 2011. 451manufacturing
firms replied. During the survey period the pound averaged euro €1.14 and
$1.62, while Brent Crude averaged $119.06 per barrel, compared with euro
1.18 and $1.55, and $93.05 per barrel in the January survey period.