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Brexit stockpiling boom ends for UK factories - CBI

Brexit stockpiling boom ends for UK factories - CBI
FILE PHOTO: A worker at perforating company Bion uses a machine at the factory in Reading, Britain September 22, 2016. REUTERS/Peter Nicholls/Files/File Photo -
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Peter Nicholls(Reuters)
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By Andy Bruce

LONDON (Reuters) - British factories suffered the biggest fall in orders this month since late 2016, gearing down from their rush to stockpile before the original Brexit deadline in March and boding badly for the economy in the second quarter, a survey showed.

The Confederation of British Industry said on Tuesday its monthly order book balance fell to -10 from -5 in April, below all forecasts in a Reuters poll of economists and its lowest level since October 2016.

The CBI's orders gauge, which is not seasonally adjusted, usually rises in May.

Overall, the survey suggested the boost to manufacturing from the push to stockpile was fading fast.

Factories are now lumbered with the greatest stocks of finished goods since 2009, the CBI said.

For a graphic on UK factory orders slide after Brexit stockpiling push - CBI, see - https://tmsnrt.rs/2ElyxUw

Howard Archer, an economist at the EY ITEM Club consultancy, said the towering inventories pointed to a "significantly weaker" performance ahead for the manufacturing sector, which accounts for 10 percent of British economic output.

"The likelihood is that the manufacturing sector in particular and the economy overall will take a hit in second quarter at least while some of the stockpiling that occurred in the first quarter is unwound," Archer said.

Earlier this month the Bank of England forecast quarter-on-quarter growth of 0.2% for the second quarter, less than half the rate in the first three months of the year.

Just days before Britain was due to leave on March 29, Prime Minister Theresa May asked the European Union for more time to negotiate a deal. The Brexit deadline is now Oct. 31.

Finance minister Philip Hammond warned that politicians pushing for Britain to leave the EU without a deal would be doing deliberate damage to the economy.

Separately, the Organisation for Economic Cooperation and Development raised Britain's growth forecast to 1.2% this year from 0.8% previously, matching the forecast for the euro zone, as Brexit was pushed back.

British manufacturers are still likely to remain wary given a slowing global economy and the risk that trade wars escalate.

British factory export orders fell in May at the fastest rate since July 2016, the CBI said.

"(With) a sharp decline in order books, it's clear why manufacturing firms are so keen to see a swift end to the current Brexit impasse," CBI economist Anna Leach said.

(Reporting by Andy Bruce; Editing by William Schomberg and Catherine Evans)

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