CBI Industrial Trends: Manufacturers Confident, But Skilled Worker Shortages Loom

- CBI report shows optimism waning in March but with bright spots 

- Exports surge as companies benefit from cheap Pound and climate of global growth 

- Employment could become a constraint as pool of skilled labour shrinks 

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Sentiment may be slightly off but the cheap Pound and global growth are supportive factors for British industry.

British exports are booming despite a more general deterioration in broad business optimism according to a survey conducted by the Confederation of British Industry (CBI), released on Tuesday.

The Industrial Trends Orders survey for March from the CBI showed a balance of +4, down from +10 in February, as a lesser number of respondents expressed a positive outlook for UK industry.

"Although manufacturing growth has slowed again this month, manufacturers continue to enjoy the fruits of stronger growth in Europe and the lower Pound," says Rain Newton-Smith, chief economist at the CBI.

Image courtesy of tradingeconomics.com  

"The survey of 356 manufacturers revealed that optimism about general business conditions deteriorated marginally, while domestic orders were largely unchanged on the quarter. Output growth slowed somewhat, but remained well above the long-run average," says the CBI's accompanying statement.

The CBI's quarterly optimism index, released at the same time, meanwhile, showed a fall to -4 from +13 previously. 

The survey did not reveal a completely pessimistic outlook, however, as optimism improved in relation to expectations of the prospects for the year ahead, and export orders accelerated at the quickest pace in 20-years.

A continually improving picture of employment was another bright spot, as was the rise in inventories of raw materials which grew to their largest level since 1977 - signaling confidence in stockpiling for future work.

Employment was so high in the sector that respondents revealed fears that a lack of availability of skilled candidates might be a major constraint on growth in the future.

"While skilled labour diminished as a likely constraint on output in the quarter ahead, concerns that labour availability would constrain investment picked up again," says the CBI report.

General capacity constraints, however, appeared to be easing compared to the previous quarter as firms made plans for expansion.

Commenting on the data, however, Samuel Tombs of Patheon Macro Economics said the general climate was indicative of a lack of investment and growth 'momentum' was slowing in 2018. 

"In one line: Steady growth in demand, but manufacturers still aren’t investing," says Tombs.  "The CBI’s survey continues to suggest that the revival in the manufacturing sector has lost some momentum this year, but remains strong by past standards."

"While we are seeing a slight softening in the domestic market, UK manufacturers continue to reap the gains from strong global demand. This is a good sign that our businesses are competitive on the world stage," adds Tom Crotty, group director of Ineos and chair of CBI Manufacturing Council.

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