Factory orders crumble as Brexit hits manufacturers

British factory orders dropped at the fastest pace for three years in the quarter to October as manufacturers remain fearful about the prospect of a disorderly Brexit.

A survey by the Confederation of British Industry showed that among 354 manufacturers, a net 6% reported a fall in new orders in the three-month period, the weakest balance since October 2015.

In the previous quarter, the balance was positive 15.

Both domestic and export orders decreased, with CBI manufacturing council chair Tom Crotty pinning the blame on “ongoing uncertainty around Brexit”.

He added: ““These figures are concerning and must not be taken lightly. Ongoing uncertainty around Brexit has made for a particularly tough quarter for the UK’s manufacturers.

“It is not surprising that many firms have recently moved publicly from contingency planning to action as the likelihood of a no-deal Brexit increases.

“Manufacturers will also be deeply concerned with the Government’s proposals for a post-Brexit immigration system, which, by dismissing the importance of low-skilled labour to the economy, risks worsening skills shortages.”

The pound’s collapse following the June 2016 referendum has made British exports cheaper for foreign buyers.

But without a trade deal with the EU, British manufacturers would be cut off from their biggest and most wealthy market.

They will be subject to tariffs and other restrictions as the UK would sit outside the bloc’s single market.

The export order balance tumbled to minus 8 from a positive of 21 and the domestic order balance also fell, the CBI said.

Business optimism eroded, booking the sharpest fall since July 2016.

Looking ahead, a net 3% of factories expect output growth to stall in the coming three months, which was the weakest expectation since December 2015.

Domestic orders are expected to drop, while export orders are forecast to grow slightly.

“This is a sobering set of figures demanding immediate action at home and abroad,” said CBI chief economist Rain Newton-Smith.

“Planned investment is being scaled back in the face of deepening Brexit uncertainty, so it’s vital that the Chancellor incentivises manufacturers to spend in areas that will help them become more productive.”