Gloom over record UK manufacturing sector slump

The UK manufacturing sector saw production slump at the quickest rate for over a decade in April, a widely-watched survey reported on Thursday, while sentiment plunged to an all-time low.

The latest CBI Industrial Trends Survey reported output volumes of -21% for the three months to April, compared to -8% in March. That was the fastest pace of decline since August 2009, with output dropping in 13 out of 17 sub-sectors.

Manufacturers expect output to fall at an even faster pace in the next three months, however, and at -67% it was the weakest expectation for future output on record. The CBI started collating survey data in 1958.

Total new orders fell at the fastest pace since July 2009, at -25%. Both domestic orders, at -18%, and export orders, at -24%, fell sharply. Looking forward, manufacturers expect total new orders to fall heavily in the next three months. At -78%, it is the weakest expectation on record.

Business sentiment also fell at a survey-record pace in the three months to April, at -87%. In January, sentiment had surged to 23% following the decisive general election result.

Rain Newton-Smith, chief economist at the Confederation of British Industry, said: “Despite the already-quick fall in output and orders in the quarter to April, expectations point to a faster decline in the next three months.

“Given the uncertainty over how long the shutdown may have to last, it’s little surprise to see businesses putting investment plans on ice as they work hard to get through this intact.” Investment spending plans for the next year sank to a survey-record low for buildings, plant and machinery.

Tom Crotty, chair of the CBI manufacturing council and group director at Ineos, called the survey “bleak reading”.

The April survey was conducted between 25 March, two days after the government announced stringent lockdown measures, and 14 April, with 330 manufacturing firms replying.

Extra questions were included specific to the Covid-19 outbreak. Of those, 81% of respondents confirmed the pandemic had had a negative impact of domestic output, while 55% said they were facing a partial shutdown or closures. Around 49% reported shipping delays for components.

More than half – 54% – have faced temporary lay-offs. Just 5% reported permanent lay-offs, but manufacturers expect to reduce headcount at the fastest pace since 1980 over the next quarter.

A total of 65% of firms said they were experiencing cash flow difficulties due to coronavirus disruption.