Press release

21 May 2020 London, GB

CBI industrial trends survey shows deeper manufacturing weakness in May

The May CBI industrial trends survey is disappointing, overall showing deeper manufacturing weakness as the coronavirus lockdown continued to weigh on activity.

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  • The May CBI industrial trends survey is disappointing, overall showing deeper manufacturing weakness as the coronavirus lockdown continued to weigh on activity
  • This was at odds with the earlier released “flash” May purchasing managers’ survey which showed some easing in manufacturing contraction in May
  • Output over the past three months fell at the fastest rate since the series started in July 1975
  • New orders fell the most since October 1981 with both domestic and export and export orders extremely weak. Prices over the next three months are expected to fall at the sharpest rate since April 2009 clearly reflecting manufacturers’ perceived need to try to gain business by discounting
  • The only improvement in the survey was that output expectations for the next three months picked up modestly in May from April’s record low, although they remained extremely low and in contraction territory

Howard Archer, chief economic advisor to the EY ITEM Club, comments:

The May CBI industrial trends survey overall showed deeper manufacturing weakness as the coronavirus lockdown continued to weigh heavily on activity. This was somewhat at odds with the earlier released “flash” May purchasing managers’ survey, which showed some easing in manufacturing contraction in May.

Specifically, the CBI’s industrial orders balance fell back further to -61% in May after falling back sharply to -56% in April from -29% in March; this took it down to the lowest level since October 1981 and even further below the long-term average of -17%.

Both domestic and export orders were extremely weak. The export balance deteriorated to -55% in May (the lowest since October 1998) from -49% in April and -28% in March. This kept it further below the long-term average of -17%.

Manufacturing volumes were reported to have fallen at a much deeper rate over the previous three months. A balance of -54% reported a rise in May, this compared to -21% in April and -8% in March and was the lowest since the series started in July 1975.

The CBI reported that output volumes fell in 15 of 17 sub-sectors, with the headline drop in output primarily driven by the motor vehicles & transport equipment & food, drink & tobacco sub-sectors.

The only improvement in the survey was that output expectations for the next three months picked up modestly in May from April’s record low, although they remained extremely low and well in contraction territory. A balance of -56% of manufacturers said they expect a rise in output over the next three months, compared to -67% in April. The balance had been -20% in March and +8% in February.

A balance of -20% of manufacturers expect to raise prices over the next three months; this is the weakest price balance since April 2009, reflecting a perceived need to discount to win business.

The CBI also reported that 51% of manufacturers had implemented partial shutdowns due to coronavirus. 59% of manufacturers said that they had temporarily laid off staff, while 9% reported permanent layoffs. 74% of firms had faced cash flow difficulties.