UK manufacturing faces rising supply pressures – CBI

by | Oct 21, 2021

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UK manufacturing output grew steadily in October but supply pressures continued to rise, a Confederation of British Industry survey showed.
The net score for output was 15% in the three months to October, broadly in line with 16% a month earlier and well ahead of the 3% long-run average. Output increased in 11 of 17 subsectors led by chemicals, aerospace, and food drink and tobacco.

The survey of 263 manufacturers found firms expected output growth to pick up substantially in the next quarter. Growth of new orders is expected to rise after slowing domestic orders affected October’s performance.

Almost two-thirds of firms said shortages of materials or components could limit output in the next quarter – the highest score since 1975. Manufacturers were also worried about labour shortages: two in five firms were worried about a lack of skilled labour and almost a third were worried about a dearth of other labour – a survey record.

Costs also continued to rise with average cost growth in the quarter to July broadly the same as July which had the fastest growth since 1980. These costs continued to feed into rising prices with no let-up predicted in the next three months.

Anna Leach, the CBI’s deputy chief economist, said: “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. Manufacturers are hiring new workers and planning further investment in plant and machinery and training, but with both orders and costs growth expected to climb over the next quarter, we’re not out of the woods yet.”

Leach called on the government to reform business rates and “frontload” investment in new industries at the coming budget.

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