Growth in UK factories’ order books and output has slowed to its weakest in 18 months as cost pressures, supply bottlenecks and softer demand hit British industry.
The latest update on manufacturing from the CBI found business optimism fell for a third quarter running amid signs that the strong expansion of the past year has come to an end.
Despite the slowdown, the employers’ lobby group said there had been solid growth in factory jobs and welcomed evidence of a pickup in investment intentions.
It urged Boris Johnson’s successor as prime minister to announce a permanent tax break to boost capital spending when the government’s two-year super-deduction – 130% relief on purchases of equipment – ends next year.
The CBI’s quarterly industrial trends survey also found cost and price pressures easing but still at historically high levels.
Anna Leach, its deputy chief economist, said: “The manufacturing sector has been an economic bright spot in recent months, but output and orders have softened amid ongoing cost pressures, supply challenges and a generalised weakening in economic conditions both in the UK and globally.
“It is encouraging, however, to see investment intentions firming. Stronger investment will be vital if the UK is to reinvigorate growth and keep recession at bay. The new prime minister will need to act quickly to fan the flames of these ambitions by announcing a permanent successor to the super deduction and urgently reforming an outdated business rates system that currently acts as a tax on investment.”
More firms told the survey that output had risen in the latest three months than reported a fall in production, but the gap of 6 percentage points was down from 19 points in April and the lowest since April 2021.
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