UK Factory Orders Improve Sharply

The Confederation of British Industry’s monthly industrial order-book balance improved sharply to -25 in August 2026 from -45 in July, marking the strongest monthly increase in more than five years and above expectations of -40. Although the reading still indicates declining orders, the improvement suggests greater resilience in the UK manufacturing sector despite the ongoing economic impact of the Iran conflict. Expectations for factory output also strengthened, while export orders moved into positive territory for the first time since June 2022. However, manufacturers continue to face significant cost pressures. The survey showed that expectations for selling prices increased to +22 from +11 in July, likely reflecting the recent rebound in crude oil prices and renewed concerns over input costs.

The UK’s total order book balance remained at -45 in July 2026, matching the joint-lowest level since September 2020 and falling short of market expectations of -40. Rising costs and weak demand are squeezing manufacturers, forcing them to absorb pressure through tighter margins, reduced investment, and further job cuts. According to the CBI’s quarterly data, cost pressures for manufacturers surged in the three months to July, with unit costs rising at the fastest pace since the three months to October 2022. However, output expectations for the next three months improved slightly, edging up to -30 from -31 in June.

The UK’s total order book balance fell to -45 in June 2026 from -41 in May, the lowest since September 2020 and worse than market expectations of -35. Output volumes dropped across most sectors, with food, drink & tobacco, mechanical engineering, paper, printing & media, and metal products among the hardest hit. Export demand also weakened, with export order books falling to -33 and remaining well below long-term averages. Firms continue to describe both domestic and overseas orders as below “normal” levels, reflecting fragile global demand conditions. Despite the downturn, selling price expectations remain elevated at 22, although this is a sharp easing from May’s 38. CBI economist Cameron Martin said manufacturers are facing weak demand and high costs, while uncertainty is limiting investment. He added that stabilisation in energy markets, including progress on US-Iran talks, could eventually ease pressures, but warned that recovery will take time.