UK manufacturers’ order book balance improves more than forecast in February

The latest survey by the Confederation of British Industry (CBI) revealed on Friday the UK manufacturers' order books improved in February to a similar position as in December 2020, but remained far below their long-run average.

According to the report, the CBI's monthly factory order book balance increased to -24 in February from -38 in the previous month, but remained well below the long-run average of -14. Economists had forecast the reading to come in at -35. Meanwhile, export order books (-39) worsened somewhat on January (-33), remaining far weaker than their long-run average (-18).

The CBI also reported that output volumes in the three months to February declined at a modest pace (-8 from -2 in January 2021). It was also expected that output would be roughly flat in the next three months (-2), marking a notable improvement in expectations from January (-24).

In other survey results, output prices were seen to be broadly steady in the next three months (+3 compared to +4 in January). This was in line with the long-run average (+3).

“Manufacturing activity remains patchy, but so far appears to have taken a smaller hit than in previous lockdowns. However, a stubbornly mixed picture persists among the different manufacturing sub-sectors, pointing to the asymmetric impact of restrictions,” noted Alpesh Paleja, CBI Lead Economist. “With some much-needed clarity coming down the track in the Government’s roadmap for easing lockdown, it is vital that manufacturers are supported beyond April, in line with the restrictions that will remain.”

Meanwhile, Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said: “The start of 2021 has been tough for manufacturers as firms acclimatize to life outside the EU and grapple with the challenges of lockdown. As we look ahead to the future, there is an incredibly exciting opportunity for the government to work with firms to help shape a manufacturing sector that is capable of driving the UK’s post-COVID economic recovery. In the meantime, however, it’s important that the sector continues to have access to the support it needs to get through the next few difficult months.”