UK factory orders fell sharply in September 2024, hitting their lowest level in the past 10 months, according to the latest survey by the Confederation of British Industry (CBI). The net balance of new orders dropped to -35, a significant decline from -22 in August, and well below the forecasted -23. The survey also revealed a steep fall in export orders, with the balance plunging from -22 to -44, reflecting weakening demand from overseas markets.

Sharp Decline in Domestic and Export Orders

The CBI’s survey indicates that both domestic and export orders are under severe pressure, with the sharp drop in new orders suggesting that manufacturers are facing increasing challenges. The worsening in the balance of export orders, which plummeted to -44, points to a considerable decline in global demand for UK goods, particularly in key export sectors like machinery, automotive, and electronics. Factors such as higher costs, currency fluctuations, and economic uncertainty in major trading partners have likely contributed to this downturn.

Economic Headwinds Weigh on Manufacturing

The contraction in factory orders comes at a time when the UK manufacturing sector is already grappling with multiple headwinds, including rising input costs, labor shortages, and slowing global growth. Ongoing inflationary pressures and higher borrowing costs have further dampened business confidence, while concerns over the impact of the upcoming autumn budget have added to the uncertainty.

Exporters, in particular, are facing a challenging environment, with weak demand from the Eurozone and other key markets exacerbating the decline in orders. The sharp drop in export orders underscores the vulnerability of the UK’s manufacturing sector to global economic conditions, as external factors such as geopolitical tensions and fluctuating energy prices continue to influence demand.

Outlook

The significant decline in factory orders suggests that the UK manufacturing sector may struggle to regain momentum in the near term. The drop in both domestic and export demand indicates that manufacturers are likely to face tough conditions as they navigate ongoing economic challenges.

Analysts warn that unless demand rebounds, the sector could face further contraction, potentially leading to job losses and lower investment. As the UK heads into the final months of 2024, the outlook for manufacturing remains uncertain, with businesses bracing for a difficult period amid ongoing economic turbulence.