Manufacturing prospects muted after Brexit – CBI

Manufacturing output and domestic orders saw firm growth over the past quarter, but both are expected to slow over the next three months, according to the latest quarterly CBI Industrial Trends Survey.

Following a slowdown in activity towards the end of 2015, which spilled over into the first half of this year, the survey of 506 manufacturers shows that the sector had a decent recovery over the three months to July. Output rose at its fastest in two years, while domestic orders and employment also improved. Export orders were flat, but improved on the fall seen in the previous quarterly survey.

But despite this improvement in activity, optimism about the business situation over the past quarter fell at the fastest pace since January 2009, in the aftermath of the referendum result. Meanwhile, the outlook for the next three months is set to soften, with expectations for total new orders growth at their lowest since January 2012, output growth set to ease and headcount expected to fall slightly.

Looking ahead to the coming quarter, concerns over economic and political conditions abroad as a constraint on exports orders are at their highest level since 1983. Yet, competitiveness in international markets has improved at the strongest pace in over six years, with a further boost expected next quarter. As a result, export orders are set to rise at an above-average pace over the next quarter.