The latest CBI Industrial Trends Survey suggests that UK manufacturing conditions remain challenging. Output volumes declined in the three months to July, although at a slower pace than in the previous quarter, extending a period of broadly flat or falling production that began in mid-2024. The decline was widespread across manufacturing, led by the food, drink & tobacco, paper, printing & media, and metal products sectors. Only aerospace and motor vehicles & transport equipment reported an increase in output. Manufacturers expect production to decline again over the three months to October.
Based on responses from 338 manufacturers collected between 25 June and 13 July, the survey highlights a sharp deterioration in demand. Total new orders fell at the fastest pace in six years, reflecting weakness in both domestic and export markets. Concerns over demand remain the principal constraint on output, with the proportion of firms citing insufficient orders or sales remaining above historical norms. At the same time, cost pressures intensified, with average costs rising at their fastest rate since 2020 and expected to increase further over the coming quarter. Against this backdrop, business sentiment and export optimism both deteriorated, while manufacturers expect to reduce employment further over the next three months and cut investment spending over the coming year.
The July survey also includes the CBI’s quarterly questions on investment intentions and capacity utilisation. For the manufacturing technologies sector, the most significant findings relate to investment intentions, which remain weak. The balance of firms expecting to increase investment in plant and machinery over the next 12 months remained firmly negative at -43, the lowest reading since October 2025.
The reasons for investing changed little overall, although the proportion of firms investing to improve efficiency declined, alongside modest falls in replacement investment and capacity expansion. The proportion citing “other” reasons for investment increased slightly.
The reported constraints on investment presented a mixed picture. Demand-related concerns eased somewhat, with fewer firms citing uncertain demand as a barrier. In addition, inadequate returns, labour shortages and difficulties raising external finance all remained below their long-run average levels. By contrast, financial constraints became more prominent, as more firms reported shortages of internal finance, rising financing costs and other factors limiting investment.
Across key manufacturing industries, investment intentions deteriorated sharply for transport equipment, moving from positive to negative territory. By contrast, sentiment improved modestly in both mechanical engineering (machinery) and metal products, although investment intentions in both sectors remained negative overall.
The main measure of capacity utilisation – the proportion of firms operating below capacity – edged up to 75%, while the four-quarter moving average remained unchanged at 76%. A separate survey question showed that 93% of firms believed they had sufficient capacity to meet expected demand, the highest proportion since October 2025, suggesting that spare capacity remains readily available across much of the manufacturing sector.
You can get the Press Release of the CBI Industrial Trends Survey from their website at http://www.cbi.org.uk/media-centre (23 July) or request it from MTA.