U.K. Factories' Pain Worsens as Domestic Slump Joins Export Woes

  • CBI factory-orders index drops to lowest since mid-2013
  • Quarterly confidence gauge falls to weakest in three years

A worker inspects stores of finished steel angles at a steel mill in Cardiff, U.K., on May 18.

Photographer: Simon Dawson/Bloomberg

U.K. manufacturers saw orders plunge the most in more than two years this month as domestic weakness compounded ongoing struggles in export demand.

The Confederation of British Industry said on Monday that its index of factory orders dropped to minus 18 -- the lowest since June 2013 -- from minus 7 in September. An export gauge dropped to the weakest since January 2013 and a quarterly measure of optimism fell to minus 12, a level not seen since October 2012.

The gloomy report follows a grim week for British industry, with Tata Steel announcing 1,200 job cuts and engineering group Caparo Industries Plc being put into administration. Part of the pressure is coming from the pound, which has advanced about 11 percent on a trade-weighted basis in the past three years. A factory index by Markit has also weakened in recent months, and the Bank of England said this month that sterling’s past increases have acted as a “drag on growth” in manufacturing.

“Manufacturers have been struggling with weak export demand for several months, because of the strength of the pound and subdued global growth,” said Rain Newton-Smith, director of economics at the CBI. “But now they’re also facing pressure back home as domestic demand is easing.”

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