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UK factories struggle to meet record demand as supply issues continue

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Empty shipping containers stacked on an old runway next to the A140, as supply chain congestion and a lorry driver shortage lead to backlogs. (Getty Images)

Factories in the United Kingdom are having a hard time satisfying the record demand for their goods due to severe supply constraints, a report shows.

According to the Confederation of British Industry (CBI), manufacturers are running down their stocks of finished goods to meet the strongest order books since records started in 1977.

The employers’ organization expressed concern in its monthly health check that the rise in demand was being accompanied by heightened inflationary pressure.

It described availability of finished goods as the weakest since 1977, while noted that expectations of future price increases were at their highest.

While 46 percent of firms said order books were above normal, 20 percent said they were below normal.

Meanwhile, export order books were the highest since 2019, with 24 percent of companies saying they were above normal and 21 percent noting they were below.

Production has increased to meet stronger demand from domestic and overseas markets as economies open up following the lifting of lockdowns.

According to the CBI, 38 percent of companies said output had risen over the past three months against 21 percent that recorded a fall.

“It’s good to see strong order books and output growth in the manufacturing sector holding up as we head into winter. Output growth has been steady for three months now and remains quicker than its long-run average,” Anna Leach, the deputy chief economist at the CBI, said.

“But intense supply side challenges continue to put pressure on firms’ capacity to meet demand. Alongside record order books, stock adequacy was the weakest on record in November and manufacturers are increasingly having to pass on significant cost increases to customers.”

Just 9 percent of firms said they were comfortable with their stocks levels, and 69 percent said they might raise prices for their domestic customers over the next three months.

The CBI data is latest sign of increasing inflationary pressure and will fuel speculation that the Bank of England will increase interest rates at the next meeting of its monetary policy committee on 16 December.

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