UK manufacturers report rapid cost growth as price pressures stay high

Output fell across the sector in the three months to October, with the output volume balance dropping to -10 from -4 in the previous quarter. Manufacturers expect conditions to stabilise slightly, with the expectations balance for the three months to January recovering to -1, but cost pressures are not expected to ease. Crucially for margins, cost growth is forecast to outpace selling-price growth — meaning firms may absorb some of the squeeze rather than pass it on in full.

The orders picture tells a similar story. The total new-orders balance improved to -16 compared with -24 in the previous quarter, so the rate of decline is slowing. But 68 per cent of respondents identified orders and sales as a factor they expect to limit output over the coming three months — suggesting weak demand, rather than capacity constraints alone, remains the dominant concern looking ahead.

Skilled labour is becoming a growing headache too. Some 32 per cent of manufacturers reported a shortage of skilled workers as a constraint on output — the highest level since January 2025. Persistent energy, employment and supply-chain costs were also identified as limiting factors.

The figures are worth treating with some care. The CBI survey captures business sentiment and expectations, not official economic data. It’s separate from the Office for National Statistics’ measures of producer prices, consumer inflation and manufacturing output — so the balances reflect what company respondents are reporting and predicting, rather than independently verified statistics.

What the data does show clearly is a sector where costs are rising faster than revenues, demand remains soft, and the pool of skilled workers available to hire has tightened. Whether that translates into higher prices for buyers or lower profits for producers — or both — the survey doesn’t yet say.