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U.K. manufacturing outlook remains gloomy, Brexit uncertainty hits confidence – CBI Industrial Trends

Manufacturing output in the U.K. continued to drop in the October quarter, owing to a considerable fall in the motor vehicles and transport equipment sub-sector, the CBI’s latest quarterly Industrial Trends Survey noted. Output volumes dropped 10 percent in the three months to October, as compared with the 1 percent rise in September. Total new orders dropped in the quarter by 15 percent, the same as in the previous quarter.

The survey of 258 manufacturing companies also indicated that prospects for the following quarter are subdued, with companies expecting output to deteriorate at a slightly more rapid rate in the three months to January.

Business optimism dropped considerably, falling at the most rapid rate since July 2016, and optimism about exports for the year ahead deteriorated to the greatest degree in 18 years. Investment intentions have also deteriorated, with plans to spend on buildings, plant & machinery and training & retraining at their most negative since the financial crisis.

The uncertainty of Brexit has been a major drag on export prospects, with the proportion of companies citing political/economic conditions abroad as a factor limiting exports over the next quarter reaching a survey record high. Moreover, the share of companies citing quota and license restrictions as a factor limiting exports was at its highest since July 1983.

New orders have dropped at largely the same rate as the previous quarter, but companies expect them to drop at a more rapid pace in the three months to January. Manufacturers did not report a sharp rise in stocks ahead of the October 31 Brexit deadline and do not expect them to rise again in the three months to January.

“This quarter’s findings paint a worrying picture for the manufacturing industry. A combination of Brexit uncertainty and weaker global growth are clearly hitting sentiment and export prospects, with job prospects at their weakest since the global financial crisis”, stated Rain Newton-Smith, CBI Chief Economist.

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