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UK factory orders continue to weaken; output falls at fastest rate since 2009

U.K. manufacturers' order books unexpectedly dropped further in negative territory in December and output volumes fell at the quickest pace since the financial crisis, according to latest survey data from the Confederation of British Industry.

The CBI, which surveyed 289 manufacturers, said the total orders balance dropped to negative 28% this month from negative 26% in November, staying below the long-run average of negative 13%. The consensus estimate of economists polled by Econoday was for a balance of negative 25%.

The volume of output in the three months to December dropped at the steepest rate since September 2009 to reach a balance of negative 16%, as 23% of respondents reported higher volumes while 39% cited a decline.

The motor-vehicles sub-sector contributed the most to the fall in overall manufacturing output amid the recent weakness in car sales around the world, the CBI said. Output grew in only six out of 17 manufacturing sub-sectors.

"Looking ahead, firms anticipate that output volumes will fall at a slower pace in the first quarter of 2020," the CBI said.

The export orders balance declined to negative 35% in December from negative 22% in the prior month, below its long-run average of negative 17%.

"These disappointing figures are reflective of the widespread weakness in the global manufacturing sector and the impact of continued Brexit uncertainty in the run-up to the General Election," said Tom Crotty, the chair of the CBI Manufacturing Council.

Following the Conservative Party's significant majority in the Dec. 12 general elections, businesses expect Prime Minister Boris Johnson to "break the cycle of uncertainty," CBI Deputy Chief Economist Anna Leach added. However, reports that Johnson does not plan to extend a Brexit transition period have renewed fears of a no-deal Brexit at the end of 2020.