Hopes of a rebound in manufacturing output in the three months to July have been dashed by figures from the Confederation of British Industry that showed production volumes declined at a record pace and total orders fell at their fastest rate since October 1980.
The slump in production affected all but three of the 17 manufacturing sub-sectors covered by the CBI survey, revealing cutbacks were felt across the board despite an easing of lockdown restrictions since May.
There were signs in the survey responses of improved levels of confidence among manufacturers, the CBI said. The quarterly business optimism balance recovered from -87 in April to -1 in July – which is about the average level seen in the 2010s.
But employment across the industry tumbled in the three months to July at the fastest pace since the depths of the recession after the 2008 crash. Firms said they expected to continue making job cuts through to the autumn, though not quite at the same pace as in the last three months.
The survey reinforces calls from the manufacturers lobby group Make UK for extra efforts from the government to protect the sector from the worst effects of the coronavirus pandemic.
At the weekend the organisation said the chancellor, Rishi Sunak, should extend the furlough scheme by six months to avoid a looming disaster that would bring about the biggest loss of highly skilled workers in manufacturing since the 1980s.
It said its own surveys showed the number of companies that planned to make redundancies in the next six months rose in July to 53%, up from 25% at the beginning of the lockdown.
Rain Newton-Smith, the CBI’s chief economist, said: “Manufacturers continue to face extreme hardship due to the Covid-19 crisis. Output volumes continued to decline at a record pace, while total orders have fallen at their fastest rate since October 1980.
“There are tentative signs of gradual recovery on the horizon, with firms expecting output and orders to begin to pick up in the next three months. But demand still remains deeply depressed.”
Echoing demands made by Make UK, she said falls in investment and rising job losses meant it was crucial for the government to consider how it could continue to support viable firms through this crisis.
The CBI uses a balanced scorecard of responses to its surveys which offsets those firms that say they are expanding with those that are contracting.
It said output volumes in the quarter to July fell at a similar pace to the previous month, down -59% from -57% in June, which was the sharpest decline since the CBI first began its survey in 1975.
Motor vehicles and transport, food, drink, tobacco and mechanical engineering were the worst hit sub sectors. Manufacturers expect output in the next quarter to begin to recover (+15%). This is the first time that firms have expected output to grow since February 2020.