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 | Cumbria Times A Voice of the Free Press |
3:00 AM 20th June 2022
business
NW Manufacturing Sentiment Falls Sharply As Demand Growth Slows And Costs Rise Further
Image by jotoler from Pixabay
Total new orders in the North West rose at a slower pace in the three months to April compared with January (+9% from +16%) and firms in the region expect new orders to fall further over the next three months (-18%).
The CBI Quarterly Industrial Trends survey, sponsored by Accenture, also showed that average unit costs grew at a historically strong pace in the quarter to April (+97% from +86% in January), as did average domestic prices (+79% from +71% in January) across the North West.
Plant and machinery investment intentions for the year ahead in the region remain broadly flat in the quarter to April (0% from -2% in January) but weakened across the other investment categories (buildings -12% from +19%; product and process innovation +26% from +40%; training & retraining +24% from +49%).
Vanessa Harding, North West Operations Lead at Accenture, said: “The North West has been a heartland of UK manufacturing for over 200 years, so it’s especially concerning to see that optimism here has had a more marked decline compared to the UK. According to the data, regional manufacturing output volumes have fallen in the region, and are expected to continue to do so in the next quarter.
“Rising costs and the availability of materials is a very real challenge for businesses here in the North West. To remain competitive, retaining, motivating and upskilling staff will be critical, as will be lowering process costs and making the supply chain as efficient as possible.”
“Rising costs and the availability of materials is a very real challenge for businesses here in the North West. To remain competitive, retaining, motivating and upskilling staff will be critical, as will be lowering process costs and making the supply chain as efficient as possible.”
Nationwide, the survey, based on the responses of 250 manufacturing firms, found:
Business optimism fell at the sharpest pace since April 2020 (-34% from -9% in January).
Output volumes in the quarter to April grew at a slower pace than in the quarter to March (balance of +19% from +27%), but growth remained above the long-run average (+3%).
Total new orders rose at a slower pace in the three months to April compared with January (+22% from +38%). Firms expect growth to slow further over the next three months (+6%).
Average costs in the quarter to April grew at the fastest rate since July 1975 (+87% from +74% in January), while domestic prices grew at the fastest pace since October 1979 (+60% from +40% in January).
A supplementary question found that the cost of raw materials was the most important factor behind expectations for cost growth in the next three months (80% of respondents said this was extremely important), followed by energy costs (59%), transport costs (41%) and labour costs (38%).
Investment intentions for the year ahead weakened across the board in comparison to January; plant & machinery (+9% from +26%), product & process innovation (+1% from +26%), training (-3% from +26%) and buildings (-6% from +2%).
Business optimism fell at the sharpest pace since April 2020 (-34% from -9% in January).
Output volumes in the quarter to April grew at a slower pace than in the quarter to March (balance of +19% from +27%), but growth remained above the long-run average (+3%).
Total new orders rose at a slower pace in the three months to April compared with January (+22% from +38%). Firms expect growth to slow further over the next three months (+6%).
Average costs in the quarter to April grew at the fastest rate since July 1975 (+87% from +74% in January), while domestic prices grew at the fastest pace since October 1979 (+60% from +40% in January).
A supplementary question found that the cost of raw materials was the most important factor behind expectations for cost growth in the next three months (80% of respondents said this was extremely important), followed by energy costs (59%), transport costs (41%) and labour costs (38%).
Investment intentions for the year ahead weakened across the board in comparison to January; plant & machinery (+9% from +26%), product & process innovation (+1% from +26%), training (-3% from +26%) and buildings (-6% from +2%).
Looking at the UK as a whole, Anna Leach, CBI Deputy Chief Economist, said: “Manufacturing orders and output continue to grow, albeit at slower rates. But the war in Ukraine is exacerbating the Covid-related supply crunch, with cost increases and concerns over the availability of raw materials at their highest since the mid-1970s. It’s little wonder that sentiment has deteriorated sharply over the past three months and manufacturers are now scaling back their investment plans.
“The government must look again at near-term support measures to help firms through this crisis. An immediate priority should be to provide cashflow support for those struggling with wholesale energy costs via the Recovery Loan Scheme, while cutting bills for Energy Intensive Industries can help maintain UK competitiveness.”