UK’s manufacturing output volumes fell at the fastest pace since mid-2020 in the quarter to December amid weak demand, according to the Confederation of British Industry’s (CBI) latest Industrial Trends Survey (ITS). 

Manufacturers expect another steep drop in output over the next three months, the survey also suggested.

The total and export order books deteriorated sharply relative to last month, with the volume of total orders falling to its weakest since late 2020. Against a backdrop of weak demand, manufacturers’ stocks of finished goods remain relatively high, at levels last seen during the early stages of the COVID pandemic.

Meanwhile, expectations for selling price inflation picked up noticeably in December, with the rate of selling price inflation during the next three months expected to be comfortably above the long-run average, CBI said in a release.

The survey found that the output volumes fell in the three months to December (weighted balance of -25 per cent, from -12 per cent in the quarter to November), the steepest decline since August 2020.

Manufacturers expect output to fall again in the quarter to March 2025 (-31 per cent), with expectations weaker than at any time since May 2020.

Output decreased in 15 out of 17 sub-sectors in the three months to December, with the significant fall driven by the furniture and upholstery, glass and ceramics and motor vehicles and transport equipment sub-sectors.

“Manufacturing output appears to have contracted during the fourth quarter, with conditions across the sector looking more challenging than at any time since the COVID pandemic in 2020,” said Ben Jones, lead economist at CBI. “Manufacturers are facing a perfect storm of weakening external demand on the one hand, amid political instability in some key European markets and uncertainty over US trade policy”. 

And on the other hand, domestic business confidence has collapsed in the wake of the Budget, which has increased costs and led to widespread reports of project cancellations and falling orders.

“Manufacturers are heading into 2025 with no expectation of any near-term improvement. As firms continue to work through the challenges of the budget, the government could help support business confidence by accelerating measures that could restore some headroom for investment, such as delivering flexibility to the apprenticeship levy or signalling a faster timetable to reform business rates, and working in full partnership with boardrooms to develop a long-term industrial strategy would send the right signals to the markets and investors that the UK is a trusted and competitive destination to do business,” added Jones.

The survey was based on the responses of 331 manufacturers.