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Manufacturing suffers

Stock shortages hampering economic recovery

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Manufacturers feeling the squeeze on component supply

Britain’s economic recovery is being hampered by continuing stock shortages which are now at record low levels.

Manufacturers in particular are struggling with weak supplies of electrical and plastic components, according to the CBI.

Its latest monthly Industrial Trends Survey showed that stock adequacy fell to -14 from July’s -11, the third record low in as many months. Stock adequacy is now at its lowest since the CBI survey began in 1977.

The survey also reveals that manufacturing output growth in the three months to August eased from last month’s record pace, but remained firm by historical standards.

The survey of 262 manufacturers found that output increased in 13 of out 17 sectors, with growth mostly driven by the food, drink & tobacco sub-sector.

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The CBI said the easing in headline output growth compared to last month was driven primarily by the motor vehicles sub-sector, which has been significantly impacted by a lack of semiconductor chips.

Total order books remained strong, at a broadly similar position to last month. However, export order books weakened, but still sit broadly in line with their long-run average.

The CBI said manufacturers expect output growth to pick up slightly over the next three months, remaining strong and close to the near-30 year high seen in June.

CBI lead economist, Alpesh Paleja, said: “Manufacturing activity remained strong this month, with total order books remaining firm and most sub-sectors reporting rising output. However, early signs from the data suggest that growth in activity may have peaked.

“It is notable that stock adequacy deteriorated to a new record low for the third consecutive month. Many firms are feeling the pinch from ongoing supply chain disruption, which also partly explains the continued strength in pricing pressures

“Despite the rebound in activity, ongoing disruptions could choke off future manufacturing growth. It’s therefore vital that businesses and the government continue to work together to smooth over some of the frictions in supply chains and the wider sector, until activity settles back down to normal levels.”

Tom Crotty, group director at INEOS and chairman of the CBI Manufacturing Council, said: “While it is great to see manufacturing performing well, there is no getting away from the fact that many firms are facing serious challenges, such as staff shortages, supply disruption, and rising costs. It is important that these issues are addressed quickly.

“Looking ahead, the upcoming Spending Review and COP26 conference present exciting opportunities for the manufacturing sector to define its role in the UK’s decarbonisation journey and economic renewal over the longer-term.”



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