According to the latest CBI Quarterly Industrial Trends Survey, manufacturing growth continued in the three months to July, but exports are set to weaken.
The survey of 445 firms reported slower growth in total new orders in the quarter to July, though it remained above average. Growth in total new orders, output and numbers employed are forecast to remain firm over the next quarter.
The volume of new export orders rose slightly, but the outlook for the next quarter is more gloomy. Survey respondents continue to report sharp falls in competitiveness in the EU, likely linked to Sterling rises earlier in the year. Political and economic conditions abroad were also seen as a constraint on orders by a significant number of firms.
Investment intentions remain broadly similar to the last quarter, staying above their long term averages, with plans for spending on building and plant and machinery improving slightly.
CBI deputy director-general, Katja Hall, said: “Manufacturers are continuing to feel the pressure from the stronger pound. Greater buoyancy in exports remains a missing element from the UK’s recovery. Nevertheless we’re encouraged by the Government’s commitment to take steps to address this as part of its recently announced productivity plan.
“The EU remains our largest trading partner, so while the UK economy’s direct exposure to Greece is minimal, we must encourage all leaders to act decisively to preserve growth and stability throughout the Eurozone.
“Despite Sterling pressures and the challenging global backdrop, investment intentions remain above average, particularly in innovation and training.”
Key findings of the survey revealed that 33% of businesses reported an increase in total new order books, and 24% a decrease.
In addition, the balance for domestic orders (+12%) was also well above the long-run average (-5%) and the same as the previous quarter.
The balance for export orders (+6%) was broadly unchanged from that in the previous two quarterly surveys (both +4%), but is above the historical average (-7%).
Overall, 25% of manufacturers said employment numbers were up, and 15% said they were down.
28% of firms reported a rise in output volumes, while 16% saw a decrease.Looking ahead, 26% of manufacturers expect total new orders to increase, and 18% expect them to decrease.
Separately, the CBI published monthly figures for July, which showed that total order books for manufacturers (-10%) were the lowest since July 2013 (-12%). Export orders were broadly in line with their long-run average (-17% against an average of -20%).