Factory growth picks up after slow start to year

Manufacturing growth has picked up to its strongest rate for a year, but firms have signalled their investment intentions remain subdued.

Wednesday, 25th July 2018, 7:00 am
Skill shortages more than anything else are starting to hamper investment

A survey of 357 manufacturers from the Confederation of British Industry (CBI) has found new orders continued to rise in the three months to July, and the survey’s measure of output hit a high of +27, up from +13 in April.

However, investment plans fell back, with firms intending to cut down on spending on buildings and land.

They also said they planned to reduce investment on new products and processes, and spending on training is expected to fall at the fastest rate since 2009.

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“The pick-up in output growth is good news and with new orders still running at a healthy rate, the near-term outlook for manufacturers remains reasonably bright,” said CBI chief economist Rain Newton-Smith.

“Yet manufacturers are still in wait-and-see mode when it comes to their investment plans.

“Skills shortages are increasing and making it hard for businesses to invest in capital projects, particularly with on-going uncertainty around the direction of Brexit talks.”

The data comes as the Bank of England decides on whether to raise interest rates.

It previously said it was waiting to see signs of a recovery in the economy after growth stalled at the start of the year.

Howard Archer, chief economist at EY Item Club, said Bank policymakers would be “relatively happy” with the CBI data.

“Conditions still look far from easy at home for manufacturers - notably, still limited consumer purchasing power as well as business caution over investment amid significant uncertainties, including over Brexit,” he said.