UK manufacturers reported another sharp deterioration in orders in July, while cost pressures strengthened to their fastest rate since late 2022, according to the CBI’s latest Industrial Trends Survey.
The quarterly survey found that manufacturing output fell in the three months to July, extending a period of flat or falling volumes that began in mid-2024. The decline was broad based across the sector, led by falls in food, drink and tobacco, paper, printing and media, and metal products.
Total new orders fell at the fastest pace in six years, reflecting weaker domestic and export demand. Manufacturers expect total new orders to decline again in the three months to October, while output expectations remain negative.
Cost pressure intensified through the quarter. Average costs rose at their fastest pace since the three months to October 2022, with the CBI reporting a balance of +65%, up from +54% in the three months to April. Manufacturers expect cost growth to slow slightly next quarter but remain well above long run averages.
Domestic selling prices also rose at an above average pace, while export prices increased more modestly. Manufacturers expect domestic prices to rise again over the next three months, though at the weakest expected pace since October 2024. Export prices are expected to fall.
The employment picture remained under pressure. Numbers employed fell in the quarter to July, with manufacturers expecting another fall in the three months to October. Stocks of raw materials were unchanged, while stocks of finished goods and work in progress declined.
The July figures followed a June reading in which manufacturing orders hit a six year low, underlining the persistence of weak demand across an industrial base already dealing with high costs, uncertain export conditions, and investment caution.
That combination limits the usual responses available in a downturn. When demand weakens, companies may seek to stimulate sales, reduce output, preserve cash, or protect margin. When costs are rising at the same time, each option becomes harder. Cutting prices may defend volumes but damage margin. Passing on costs may preserve margin but weaken order books further.
Manufacturing remains exposed to wider questions over UK competitiveness. Energy costs, wage bills, employer taxes, skills shortages, planning constraints, supply chain risk, and trade friction all affect the case for investment. Demand uncertainty then discourages capital expenditure, even where companies know they need automation, energy efficiency, new equipment, or product development to remain competitive.
The employment figures carry weight beyond the factory floor. Manufacturing supports engineering services, logistics, maintenance, packaging, financial services, training providers, regional suppliers, and local economies. A fall in headcount can therefore pass through supply chains and communities, particularly in areas where industrial employers anchor skilled work.
Export weakness adds another layer of pressure. UK manufacturers that sell overseas are exposed to currency movements, certification rules, customs processes, logistics costs, and geopolitical disruption. Overseas markets can provide diversification when domestic demand is weak, but the latest survey suggests international conditions are not providing enough support.
Inventory movements point to continued caution. Falling stocks of finished goods and work in progress may reflect weaker output, tighter working capital control, or reduced confidence in near term demand. Raw material stocks being flat also suggests manufacturers are not preparing for a near term rebound by materially increasing input positions.
The pricing picture is particularly difficult. Manufacturers reported rapid cost growth but weaker expectations for domestic price rises ahead. That gap can compress profitability if companies are unable to pass higher input, labour, energy, or finance costs to customers. Smaller manufacturers may be more exposed because they often have less bargaining power with large customers and suppliers.
The CBI data also sits against a policy backdrop in which industrial strategy is being pulled in several directions. Companies are being asked to decarbonise, digitalise, strengthen supply chain resilience, improve productivity, and compete internationally. Those investments require confidence in demand and stable operating conditions. Weak order books and rising costs push management attention towards cash protection and shorter planning cycles.
The next quarter will show whether July’s deterioration marks another low point or a continuation of the same downtrend. Manufacturers expect output, orders, employment, and stocks to fall again in the three months to October. If that happens while costs remain elevated, the sector will face another round of pressure on margins, investment, and workforce planning.
You must be logged in to post a comment.