Factories struggle to meet demand amid supply chain crisis – survey

UK factories have seen order books swell to a record high this month but output growth slowed sharply as they struggled to meet demand amid the supply chain crisis, according to a survey.

The latest industrial trends survey by the CBI business body revealed manufacturers reported order books at their strongest level since records began in 1977.

Export order books also hit their highest level since March 2019.

However, output growth dropped for the second month in a row, slowing to its lowest level since May in a sign that the supply chain woes are holding back the sector’s recovery.

Anna Leach, CBI deputy chief economist, said: “Amidst a variety of supply challenges, companies are beginning to struggle to meet high demand.

“Despite close to half of manufacturers surveyed reporting order books above normal, output growth has slowed sharply, albeit remaining relatively robust.”

Tom Crotty, group director at INEOS and chair of the CBI manufacturing council, added: “Global supply chain issues and cost pressures are continuing to hold back the sector.

“It is important that these issues are addressed as a priority.”

The poll of 273 manufacturing firms showed a balance of plus 16% for output growth, down from plus 22% in August.

Stock levels improved slightly from the record lows in August, but remained weak compared to long-run averages, according to the CBI.

Manufacturers are also facing surging prices as shortages of raw materials worldwide and higher freight costs start to bite.

The poll showed expectations for average prices over the next three months at a balance of plus 41% – down from 43% in August but significantly higher than the long-run survey average of plus 3%.

The CBI warned energy price hikes will heap further inflation misery on the sector.

“As well as skill and labour shortages, sharply increasing material costs and shortages of key components, producers now face rocketing energy prices, said Ms Leach.

“With pressure on energy supply set to increase in the colder months ahead, energy security is vital for ensuring that crucial parts of the supply chain are able to continue operating.”