International Trade Documentation and Publications

UK factory output stalls as strong pound impacts manufacturing growth

Created: 24 September 2015

Britain’s factory output remained stagnant this month ending a two-and-a-half-year run of growth after a fall in orders and a crunch on prices sapped the manufacturing sector’s confidence, according to an industry survey.

A decline in export orders took the biggest toll on the sector in September, dragging the total order book to its lowest level for six months. Firms said the outlook was still positive, although much less than see in August.

The Confederation of British Industry (CBI), which conducted the industrial trends survey of 491 firms earlier this month, said the slowdown in China and the continued lack in confidence within the eurozone, the UK’s single largest export market, had persuaded firms to freeze production.

Rain Newton-Smith, the business group’s director of economics, also blamed the strong pound, which she said was having a major impact on exporters, forcing them to cut prices to remain competitive.

She said price cuts had squeezed manufacturers’ export margins, even though lower oil and metals prices were helping to ease import cost pressures.

The CBI survey, which assesses the sector based on a balance of responses from individual firms, found that 26% of firms reported that output grew in the three months to September, while 25% said it decreased, giving a rounded balance of 0%, its weakest reading since January 2013.

Howard Archer, chief UK economist at IHS Global Insight, said the CBI survey showed that UK manufacturers are continuing to find life very challenging.

He said: “The survey fuels an already strong suspicion that manufacturing output is unlikely to contribute much to UK GDP growth in the third quarter, and could even have contracted again after a drop of 0.3% quarter-on-quarter in the second quarter.”

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Britain’s ‘diesel tank’ is nearly empty!

Created: 18 September 2015

Britain is facing a diesel drought that could drive up prices at the pump, and leave the country more vulnerable to supply shocks, a transport policy group has warned.

The RAC Foundation, said the rapid demand growth for diesel in Britain and the closure of some of its refineries had created a difficult situation.

“We are having to look further and further afield for the fuel we need,” said Steve Gooding, director of the RAC foundation, adding that Britain was “at the mercy of the global market”.

Refineries across Europe are largely designed to produced gasoline, rather than diesel, despite disproportionate demand growth for the latter fuel driven in part by government policies targeting lower emissions.

The RAC said diesel demand had risen 76% over the past 20 years, compared with a 46% decrease for petrol.

This mismatch has for years put pressure on European refineries’ profitability. Capacity of more than 2 million barrels per day (bpd) has closed since 2009, including the Coryton, Teesside and Milford Haven refineries in the UK.

These changes tripled Britain’s net imports of petroleum products last year.

While there have been rapid increases in diesel production elsewhere in the world, including the Middle East, India and the United States, the RAC warned that the closure of another UK refinery could “pose very serious risks to security of supply… unless there is investment in additional storage capacity and import infrastructure.”

"Recently motorists have benefited from falling forecourt prices," Gooding said. "We should be concerned about the potential for things to go the other way."

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