The survey reported: “Total new orders completed a year of growth, although this decelerated from the very strong rise of the prior quarter. Output also grew, and did so faster than its long run average rate for the second consecutive quarter. Both orders and output are expected to grow further in the next three months.”
Spikes in the price of commodities and oil as well as natural disasters, such as the earthquake in Japan, have dampened the mood despite reasonable growth in output, a senior CBI economist told FoodManufacture.co.uk.
In the wider manufacturing sector the debt crisis in the euro zone was also undermining confidence.
According to Barclay’s Manufacturing Weekly Newsletter: “The latest industrial trends survey by the employers group established that 30% more businesses were pessimistic about the future than optimistic, while companies expected a fall in orders, output and staff.”
Terry Jones, director of communications at the Food and Drink Federation (FDF), said: “During 2011, challenges such as commodity price volatility have undermined manufacturers’ business confidence across the board.”
The mood has become bleaker since last April when the previous industry trends survey reported that UK manufacturing was performing strongly. Recovering global trade, a low Sterling exchange rate and some recovery in the US – one of the biggest importers of UK goods – all gave UK manufacturers an edge, the CBI economist said.
Although orders have increased, costs have also risen – leading to smaller margins for food and drink manufacturers. Despite some improvement recently, orders are expected to fall in the next quarter, the CBI economist said.
Cost inflation continues to affect business optimism and restricted investment opportunities, added Jones. In particular, smaller businesses are struggling, he added.
The survey reported that manufacturers planned to invest less in plant and machinery in the next year. Although employment has held level this year, it is predicted to fall over the next three months.
But Jones expressed faith in the sector’s ability to survive and said that the sector’s turnover had continued to grow every year.
“While the current business environment remains challenging and the findings from the CBI’s recent Industrial Trends survey do suggest concern within the wider manufacturing industry, the food and drink sector’s track record demonstrates a sector that has proved largely resilient and capable of growth in adverse conditions,” he said.
The CBI statistics are based on the organisation’s quarterly survey of industrial trends, which was conducted between September 26 and October 12 and quizzed 450 manufacturing firms.