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21.10.2021

UK manufacturers’ order book balance decreases more than forecast in October

The latest survey by the Confederation of British Industry (CBI) revealed on Thursday the UK manufacturers' order books tumbled in October, hitting the lowest level in six months.

According to the report, the CBI's monthly factory order book balance decreased to +9 in October from an all-time high of +22 in the previous month. This was the lowest positive reading in the last six months. Economists had forecast the reading to come in at +18. 

The CBI also reported that output volumes in the three months to October rose at a similarly firm pace to September (+15 from +16 in September). It was expected that output growth would accelerate significantly in the next quarter (+33).

In other survey results, numbers employed in the quarter to October (+24) increased at a similarly quick pace to July (+24, fastest since 1973). Headcount was seen to rise at a faster pace next quarter (+33). Average costs growth remained elevated in the quarter to October (+71) at a broadly similar pace to July (+73, quickest since 1980). It was also expected that cost growth would speed up more next quarter (+81). Elsewhere, the share of firms citing materials/components (64%) or skilled labour (40%) as factors likely to limit output next quarter rose to their highest since January 1975 and July 1974, respectively. Meanwhile, the proportion mentioning other labour (31%) as a potential limiting factor was at its highest on record.

“From higher material costs to labour shortages, manufacturers continue to face a number of serious global supply challenges hampering their ability to meet strong demand,” noted Anna Leach, CBI Deputy Chief Economist. “Manufacturers are using key levers, such as hiring new workers and planning further investment in plant & machinery and training, to expand production. But with both orders and costs growth expected to climb over the next quarter, we’re not out of the woods yet.”

Meanwhile, Tom Crotty, Group Director at INEOS and Chair of the CBI Manufacturing Council, said:It is reassuring to see output and orders continue to grow as we enter the autumn. However, the last quarter has been undoubtedly overshadowed by firms facing shortages of materials or components, struggling to fill roles, and grappling with increased energy cost pressures. It is essential that the government continues to work constructively with businesses to identify ways to alleviate this difficult situation.”

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