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UK manufacturers register weakest output growth since May 2018, ahead of Brexit

The U.K.'s manufacturing sector registered the weakest output growth since May 2018 in the three months to March amid mounting Brexit uncertainty, according to the Confederation of British Industry.

Of the 358 manufacturers surveyed, 27% reported total order books to be above normal while 26% said they were below normal, giving a balance of +1% compared with a reading of +6% in the quarter to February.

Output volume growth weakened to a balance of +4% in the three months to March, compared to +7% in the prior quarter.

The growth in output volumes was driven by food, drink, and tobacco, chemicals, and metal manufacture subsectors. Conversely, the mechanical engineering, paper, printing and media, and motor vehicles and transport equipment subsectors weighed on the growth.

In response to a question about the effects of Brexit on business activity, a quarter of respondents reported stockpiling, while others reported depressed demand, especially for export orders, and slowed investment owing to the ongoing uncertainty.

Facing a deadline a little more than a week away with no Brexit deal in hand, the U.K. asked the EU to delay the country's departure from the bloc until June 30, but Brussels said it would grant an extension only if British lawmakers agree on a withdrawal agreement. Any short extension to Brexit should last only until May 23, according to European Commission President Jean-Claude Juncker.

"The manufacturing sector has slowed again this month and is now barely growing," Anna Leach, CBI head of economic intelligence, said. "Brexit uncertainty is one of the biggest threats to growth in the U.K. manufacturing sector."

"It is essential that politicians eliminate the threat of a no-deal Brexit in order to alleviate manufacturers' fears of border delays, ruptured supply chains and tariffs on exports to the EU."

The global economic slowdown will also weigh on the U.K. manufacturing sector as external demand wanes, the survey noted.

In its December 2018 economic forecast, the CBI projected steady economic growth, improved business investment and export growth in the U.K. in 2019 and 2020, assuming an orderly exit from the EU.

However, a no-deal scenario "would blow these figures out of the water, severely hurting businesses, jobs and living standards," the CBI warned at the time.