Supply and labour shortage concerns among manufacturers in the UK escalated in October, according to the latest quarterly CBI Industrial Trends Survey released Thursday.
Almost two-thirds of the 263 firms asked cited a lack of materials and components as a factor likely to limit their output over the next quarter. It was the highest reading since January 1975.
Manufacturers also expressed heightened concerns about labour shortages affecting future output, with two-in-five firms worried about a lack of skilled labour – and nearly a third concerned about availability of other labour.
Cost and price pressures
The survey also highlighted how the manufacturing sector continues to face acute cost and price pressures with firms reporting that average costs growth in the quarter to October (+71%) remained broadly in line with July (+73%).
Rapid cost growth has continued to feed into price pressures, with average domestic and export prices growing at their fastest rate since April 1980 and April 2011, respectively, the survey said.
Looking ahead to the next three months, cost growth is set to speed up further (+81%), with both domestic and export price inflation expected to accelerate, the survey also noted.
“From higher material costs to labour shortages, manufacturers continue to face a number of serious global supply challenges hampering their ability to meet strong demand,” Anna Leach, CBI deputy chief economist, said.
She also said that manufacturers are using key levers, such as hiring new workers and planning further investment in plant and machinery and training, to expand production. But with both orders and costs growth expected to climb over the next quarter, she warned “we’re not out of the woods yet.”
“While the supply chain advisory group is set to help unblock short-term challenges facing production, strengthening the sector over the long-term demands bold action in the Budget. By reforming the outdated business rates system and frontloading investment into new industries, the Government can turn the manufacturing industry into an engine for a more innovative and sustainable economy,” she added.
Total new orders
Total new orders grew at a slower pace (+22%) compared to July (+48%), with the deceleration driven by an halving in domestic orders growth (+21% from +42% in July).
Export orders, however, increased at a broadly similar pace to the last quarter (+10% from +12% in July). The survey said manufacturers expected total new orders growth to pick up in the next quarter, led by an acceleration in domestic and export orders.
Tom Crotty, group director at INEOS and chair of the CBI Manufacturing Council, also commented on the latest findings.
“It is reassuring to see output and orders continue to grow as we enter the autumn. However, the last quarter has been undoubtedly overshadowed by firms facing shortages of materials or components, struggling to fill roles, and grappling with increased energy cost pressures,” he said.
Crotty also highlighted how it was essential that the government continues to work constructively with businesses to identify ways to alleviate the difficult situation.
“Overall investment intentions remain strong, despite softening somewhat on last quarter. Firms expect capital expenditure to increase for plant & machinery, training & retraining, and product & process innovation in the next 12 months (compared to the last 12). Investment in buildings is expected to decrease,” he added.
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