UK factories warn of low stocks

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Manufacturers have reported strong growth in output in the last quarter of the year, but their stocks have dropped to record lows for a second consecutive month.

Output rose at its fastest rate since July, with increases in 15 of 17 subsectors, according to a survey of 258 manufacturing companies by the CBI, the leading business lobby group. The biggest increases in the three months to December came from the production of food, drink, tobacco, motor vehicles and transport equipment.

However, inventories deteriorated in December to -24 per cent from -16 the month before. The difficulties are set to continue as companies expect acute price pressures to continue for the next three months.

Anna Leach, deputy chief economist at the CBI, said that businesses had increased output to meet demand. “UK manufacturing demand remains strong,” she said. “However, behind the scenes, firms are battling pressures on a number of fronts. Stock adequacy of finished goods worsened to an all-time low for the second month in a row, and continued expectations for sharp price growth are a further challenge.”

Companies would benefit from the shift in government policy from isolation to regular testing to control the spread of the Omicron Covid variant because it allowed businesses to continue to operate, Leach said.

Business confidence remained strong despite Omicron, according to a barometer published by Lloyds Bank. Confidence in the construction sector recovered from a low of 28 per cent in November to 39 per cent in the two weeks to December 10. Overall business confidence was unchanged at 40 per cent.

Business Matters Magazine

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