U.K. Factories Start 2016 on Weak Footing as Export Orders Fall

  • New orders decline in January, according to CBI survey
  • Manufacturers' sentiment for the outlook remains weak

Manufacturers aren’t having a great start to the year.

Export orders fell at a sharper pace in January compared with December and total orders at factories also declined, the Confederation of British Industry said in a survey published in London on Monday. An index of optimism, measured on a quarterly basis, rose slightly, but remained below zero.

The industry has been in the doldrums for years as weakness in the euro area and the strength of sterling weighs on exports, and the CBI report adds to evidence that improvements aren’t on the horizon. Industrial production plunged the most in almost three years in November, according to official data from the statistics office.

“Uncertainty around the prospects for global growth, uncompetitive energy costs and the strength of the pound have all played their part in U.K. manufacturers finding conditions tough when trying to sell overseas,” said Rain Newton-Smith, CBI director of economics.

The CBI survey showed that while domestic demand remains strong, global turmoil is creeping further into growth prospects. Chancellor of the Exchequer George Osborne said that the U.K. faces a “dangerous cocktail” of risks stemming from China’s cooling economy and the drop in oil prices.

Britain’s planned referendum on European Union membership -- which could be held as early as June -- isn’t hampering investment, Osborne said. The CBI said manufacturers’ investment intentions have improved in the past three months, with planned spending on training and product innovation rebounding. Companies expect a small increase in employment over the next three months, after it held steady over the last quarter.

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