The CBI Industrial Trends Survey (ITS) for April shows another fall in manufacturing output, extending a run of flat or falling volumes that goes back to mid-2024. The percentage of firms “working below capacity” was at its highest since July 2020, and investment intentions also worsened from the January survey.
Throughout this report, please note that while it is labelled as “April” this refers to the publication month. Responses were collected between 25 March and 13 April, meaning the results primarily reflect conditions in March; similarly, the three-month periods align with calendar quarters with Q1-26 for current-period questions and Q2-26 for forward-looking questions.
Both output and orders declined, as competitiveness in UK markets deteriorated at a record pace. Output volumes declined in the quarter to “April”, with the rate of contraction accelerating compared with the quarter to “March”. The downturn was broad-based, affecting 14 of 17 sub-sectors, and was driven primarily by falls in “food, drink & tobacco”, “chemicals”, “metal products” and “mechanical engineering”, the latter two being key customers for MTA Cluster members. Firms anticipate a further reduction in output over the three months to July.
Total new orders also fell during the quarter, marking the sharpest decline since July 2020, with both domestic and export demand weakening. Manufacturers expect the pace of decline in new orders to increase in the three months to July. Order book levels remain, by a significant margin, the most commonly cited constraint on output for the coming quarter, highlighted by 66% of respondents.
Business sentiment deteriorated sharply in April, with manufacturers’ optimism regarding both the overall business outlook and export prospects weakening. Both balances recorded their steepest declines since April 2020.
This is one of the longer quarterly surveys, including questions on investment intentions and capacity utilisation.
With the share of firms operating below capacity at its highest level since July 2020, investment intentions for the year ahead remain subdued. Over the next 12 months, manufacturers plan to scale back spending on buildings, plant and machinery, product and process innovation, and training and retraining – where intentions are at their weakest in six years.
Uncertainty about demand remains the principal constraint on investment, cited by 62% of manufacturers, followed by inadequate expected returns (33%) and a shortage of internal finance (23%).
There are two ways of looking at capacity utilization and they moved in opposite directions compared to the January Survey. The percentage of firms reporting that they were operating “below normal capacity” increased to its highest level since July 2020. On the other hand, the percentage of “firms with adequate capacity to meet expected demand” rose slightly from January. The CBI press release on these survey results is available on their website at https://www.cbi.org.uk/media-centre/ (23 April) or we can let you have a copy of the summary of the results and some charts around the investment intentions data.