Chemicals playing major role in increased UK manufacturing orders – CBI

LONDON (ICIS)–Total orders in the UK’s manufacturing industry were the highest in just under 30 years in the three months up to November 2017, according to the latest CBI Industrial Trends Survey on Tuesday, with chemicals making a significant contribution.

The survey also found that export order books were at their joint-highest level in more than 20 years, with chemicals once again playing an important role alongside electronics and transport goods.

According to the key findings of the survey, 28% of manufacturers reported total order books to be above normal, while 11% said they were below normal, giving a balance of 17%.

In terms of export order books, 26% said they were above normal, while only 6% said they were below average, giving a balance of 20%, the survey said.

It also found that 27% of UK manufacturers expect output growth to accelerate in the three months up to February 2018, with 19% expecting average selling prices to increase in the same time period.

“UK manufacturers are once more performing strongly as global growth and the lower level of sterling continue to support demand,” said Anna Leach, CBI’s head of economic intelligence.

“Output growth has picked up again, and export order books match the highest in more than 20 years.”

“Nonetheless, uncertainty continues to hold back investment and cost pressures remain strong. Manufacturers will be hoping the Budget brings some relief from the business rates burden in particular.”

The CBI’s findings were supported by a IHS Markit manufacturing purchasing managers’ index survey for October, published earlier this month, which said that output and new order growth remained robust during the month.

The UK’s manufacturing PMI grew to 56.3 in October, compared to 56.0 in September. A reading above 50.0 represents economic expansion, whereas a reading below 50.0 represents a contraction.

“UK manufacturing made an impressive start to the final quarter of 2017 as increased inflows of new work encouraged firms to ramp up production once again,” said Rob Dobson, director at IHS Markit.

“The sector looks to be achieving a quarterly rate of expansion close to 1%, therefore sustaining the solid pace of growth signalled by the official ONS estimate for the third quarter.

“The domestic market remained strong, whereas new export orders increased at a slightly slower pace, the latter showing signs of being hit by the recent strengthening of sterling.”

In a recent interview with ICIS, Stephen La Roux, head of economics for the UK chemicals trade group CIA, said that the chemicals industry has outpaced general industry, generating volume growth “of 3.2% in the year to September, compared to around 2% for the general manufacturing sector”.

However, Le Roux added that, while sales and exports are still growing in the industry, the outlook over the next 12 months is a little cloudier as “Brexit’s threat looms large”.

Pictured above: A petrochemical  complex at Grangemouth, Scotland.
Picture source: Steve Cox/REX/Shutterstock

Focus article by Niall Swan