Growth highest in a year but firms are failing to invest in skills and products, says CBI

This article is more than 2 years old

This article is more than 2 years old

A pick-up in the pace of manufacturing growth to its fastest in a year has failed to prevent a fall in investment as firms mothball spending plans amid concerns over Brexit.

The latest snapshot of industry from the Confederation of British Industry found that despite mounting skills shortages and capacity constraints, companies were cutting back on product development and training at a rate not seen since the economy was in recession in 2009.

The employers’ organisation said the number of firms reporting higher output in the three months to July exceeded those reporting a fall by 27 percentage points – up from +13 points in April.

It added that the strength of order books – particularly for domestic customers – meant the short-term outlook for manufacturers was bright, although the pace of output growth was likely to abate over the coming three months.

Rain Newton-Smith, the CBI’s chief economist, said it was worrying that companies were cutting back on training budgets at a time when skills shortages were affecting the ability of firms to respond to growing demand.

The survey found that the proportion of firms working below capacity had dropped close to the record-low seen at the turn of the year, while the share of firms citing the availability of skilled labour as a likely constraint on activity increased well above the long-run average.

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Tom Crotty, group director of Ineos and chair of the CBI manufacturing council, said: “It’s great to see the manufacturing sector firing on all cylinders, with production revving up again after the slowdown earlier this year.



“But rising trade tensions and ongoing uncertainty over our future trade and customs arrangements are clearly taking their toll on manufacturers’ confidence and investment.”

Meanwhile, the latest health check on the eurozone economy from the research company Markit found weaker activity amid signs of mounting global trade tensions and a waning impact from the stimulus provided by the European Central Bank.

Markit’s flash composite index – which pulls together evidence from both manufacturers and service sector companies – slipped back from 54.9 in June to 54.3 in July.

