UK manufacturing order books improved sharply in August, offering an early indication that demand conditions are becoming less severe after an extended period of weak industrial activity.
The latest Industrial Trends Survey from the Confederation of British Industry recorded a total order-book balance of -25, compared with -45 in July. The figure remains negative, meaning more manufacturers continue to describe orders as below normal than above normal, but it was the strongest reading since November 2024.
The 20-point monthly improvement represented a substantial reversal from July, when manufacturers reported some of the weakest order conditions since the pandemic.
Export demand recorded the clearest change. The export order-book balance rose to zero from -33 in July, meaning manufacturers collectively described overseas orders as normal for the first time since June 2022.
Production has yet to follow the same path. The balance for output volumes over the three months to August stood at -17%, compared with -24% in July, and output declined across 12 of the 17 manufacturing subsectors covered by the survey.
Companies expect production to fall again over the next three months, although the expected balance of -7% represents a smaller contraction than recent readings.
Cameron Martin, senior economist at the CBI, said: “Stronger global demand is providing some welcome relief for manufacturers, with export order books improving sharply and lifting overall orders.”
Order books nevertheless remain weaker than their historical norm. The August balance of -25 compares with a long-run average of -14, leaving a considerable gap between a less difficult trading environment and a sustained industrial expansion.
Cost pressure is also moving in the opposite direction. Expectations for selling-price inflation increased to a balance of +22 from +11 in July, against a long-run average of +8. Manufacturers therefore expect to raise prices more rapidly over the coming quarter even as output remains subdued.
The combination complicates the outlook. Improving orders can increase utilisation and revenue, but the benefit to margins depends on the cost of energy, materials, labour, finance, and transport. Companies unable to pass those increases through to customers may see relatively little earnings improvement from stronger demand.
The August survey follows a difficult first half of the year. In June, the CBI recorded total order books at -45, their weakest since September 2020. Its July quarterly assessment also showed new orders falling at their fastest pace in six years, alongside weak investment intentions and subdued business confidence.
Export demand could provide an important counterweight if the August improvement persists. Overseas orders allow manufacturers to offset weaker domestic spending and broaden activity beyond sectors dependent predominantly on UK consumers or corporate investment.
Global conditions remain uncertain, however. Energy markets have become more volatile, freight disruption continues to affect some routes, and manufacturers remain exposed to changes in tariffs, currencies, and international demand.
Rising selling-price expectations suggest companies are already preparing for some of those pressures. Where customers have alternatives, passing through higher costs can weaken demand again, leaving manufacturers to balance volume and margin.
The sector is also managing structural investment requirements alongside the immediate cycle. Automation, energy efficiency, digital systems, decarbonisation, and new production equipment require capital at a time when many companies remain cautious about the strength of future orders.
That helps explain why an improvement in survey balances does not immediately translate into new factories, machinery, or recruitment. Businesses generally need confidence that higher demand will persist before committing to additional fixed costs.
August has nevertheless broken a run of particularly weak readings. Export orders are no longer being described as below normal, total order books have recovered considerably, and the expected decline in output has moderated.
The next few surveys will establish whether those changes represent the beginning of a broader recovery or a correction from unusually depressed summer levels. Manufacturing remains below historical demand norms, and price expectations are rising, but the sector entered late summer in a more constructive position than it occupied a month earlier.
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