Orders for UK made goods have fallen at their fastest rate since 1999, as both domestic and overseas orders are hit by the global economic slowdown, according to the CBI.

The latest quarterly CBI Industrial Trends survey shows that declining demand for manufactured goods, coupled with a sharp fall in output, has resulted in the sharpest single quarter fall in manufacturing confidence for 28 years.

Malcolm Hyde, CBI South East Regional Director, said: “This survey was conducted during a period of exceptional economic turbulence, so it is unsurprising that confidence has taken such a hit. However, the sharp falls in orders and output show that the slowdown in the UK economy is now spreading to sectors previously resilient to the weakness in the banking and housing markets.”

In the last three months, 16 per cent of manufacturers reported a rise in new orders while 46 per cent said they had fallen. The resulting balance - the difference between the percentage of manufacturers reporting an increase and those reporting a decrease - of -30 per cent signalled the fastest quarterly fall in total new orders since January 1999. Much of this was driven by weak domestic demand.

A balance of -38 per cent of firms reported falling domestic orders, the sharpest fall since January 1992. But export orders, which in previous surveys had been supported by the depreciation of Sterling, also fell (a balance of -19%) as the global economic slowdown suppressed demand. 

Firms’ perceptions of their total order book levels deteriorated over the quarter with a balance of -39 per cent reporting levels below normal, the lowest since October 2003.



Manufacturing output fell at the fastest rate in ten years, with a balance of -29% of firms recording a drop in the last three months. Manufacturers see no let-up in the coming quarter with output (-31%), domestic orders (-42%) and export orders 
(-21%) all expected to fall further. 



Falling orders and output appear to be weighing heavily on manufacturers’ sentiment. Four per cent were more optimistic about the general business situation than three months earlier against 64 per cent who were less so. The resulting balance of -60 per cent represents the fastest fall in confidence since July 1980.


The survey reveals that more difficult lending conditions following the global credit squeeze are acting as a brake on manufacturers’ investment plans. The balances of respondents planning to reduce capital spending on buildings and machinery over the next twelve months are the highest since the early 1980s.



Sixteen per cent of firms cited the availability of external finance as a constraint on investment, well above the four per cent recorded in July and the highest figure since the question was first asked in 1979. The cost of finance is also increasingly seen as a constraint, cited by 8 per cent in the past three months, up from 5 per cent previously.

Malcolm Hyde continued: 

“It is of serious concern that constraints on capital now appear to be affecting manufacturers, in a way that had not been the case earlier. We can but hope that the recapitalisation of banks and the cut in interest rates, which took place just as the survey closed, will prevent a further credit squeeze over the winter.”


Firms increasingly view uncertainty about future demand as the most important factor curtailing investment plans (58% is the highest level recorded since July 2003). 

Nine per cent of firms said their output was likely to be constrained by credit or finance in the coming quarter, the highest figure since 1975.



The number of job losses during the quarter was not as steep as firms had predicted in the previous quarterly survey, with a balance of -15 per cent cutting staff. However, more jobs are expected to go in the next three months with a balance of -33 per cent predicting they will reduce employment. Based on the survey results, the CBI forecasts 23,000 manufacturing jobs will be lost in the third quarter, rising to 42,000 in the fourth quarter.