Brexit uncertainty sees stockpiling race to post-financial crisis peak

Brexit-related stockpiling has started to ease and manufacturing order books have slumped to their lowest level since October 2016, the Confederation of British Industry (CBI) revealed on Tuesday (21 May).

According to the latest Industrial Trends Survey by the CBI, which represents approximately 190,000 businesses across the UK, 23% of manufacturers reported total order books to be above normal, and 32% said they were below normal.

Order books further deteriorated compared with the previous month. Total orders reached their lowest balance since October 2016, while export orders worsened to a balance not seen since July 2016. Nonetheless, both were broadly in line with the long-run averages.

Manufacturers rushed to stockpile goods ahead of the original deadline for quitting the European Union of 29 March.

In the three months to May, 35% of firms said their present stocks of finished goods were ‘more than adequate’, whilst 9% said they were ‘less than adequate’, giving a balance of 25% – the highest balance since March 2009.

Inflation expectations for the next three months remained flat for the second survey in a row and are now at their lowest since March 2016.

Across the economy, stock-building has supported economic growth in early 2019. However, business surveys suggest that underlying conditions remain more subdued, as Brexit uncertainty and slower global growth further affect activity.

Anna Leach, CBI Deputy Chief Economist, said: “These results provide further evidence that manufacturers have been stockpiling at a rapid pace as part of their Brexit contingency plans. When combined with a sharp decline in order books, it’s clear why manufacturing firms are so keen to see a swift end to the current Brexit impasse.

“With investment down, stockpiling up, and the threat of a no-deal ever present, we desperately need parliament to thrash out a viable deal in the national interest. Where the cross-party talks failed, Parliament must succeed, or continued economic paralysis will see us hurtle ever closer to disaster.”

Tom Crotty, Group Director of INEOS and Chair of CBI Manufacturing Council, said: “Manufacturers are being forced into putting huge amounts of money and resources into contingency planning that could have been spent on creating jobs or making investments in new technology. This relentless Brexit uncertainty must be lifted as a matter of urgency.

“As long as the deadlock continues, the sector is being held back from solving long-term challenges such as raising productivity and addressing skills shortages.”

The survey of 279 manufacturing firms revealed that output growth was predominantly driven by the mechanical engineering, chemicals, food, drink, and tobacco sub-sectors, while the motor vehicles and transport equipment and the textiles and clothing sub-sectors proved the biggest drags on growth.