UK factory orders slide in June as Brexit uncertainty weighs: CBI

[June 19, 2019]    By David Milliken

LONDON (Reuters) - British factory orders slid in June against a backdrop of Brexit uncertainty, and manufacturing output in the second quarter looks on course for its weakest performance in three years, the Confederation of British Industry said on Wednesday.

The CBI's monthly industrial orders index sank to -15 this month from -10 in May, its weakest since October 2016 and a steeper fall than a forecast of -12 in a Reuters poll.

The production index for the three months to June dropped to its lowest since the three months to April 2016, hit by sharp falls in car production this April.

Many carmakers suspended production that month, expecting disruption around the March 29 date on which Britain had been due to leave the European Union.

"Brexit uncertainty is holding back growth in key industries," said Tom Crotty, group director of energy and chemicals group INEOS, who chairs a CBI manufacturers' panel. "The first item in the new prime minister's in-tray must be to quickly resolve the Brexit deadlock."

Britain is now due to leave the EU on Oct. 31, and former foreign secretary Boris Johnson -- the leading contender to succeed Prime Minister Theresa May -- says he is open to leaving without a deal if the EU will not renegotiate.

The CBI, which wanted Britain to remain in the EU, has repeatedly said a no-deal Brexit would cause major disruption to trade and supply chains.

Britain's economy performed better than expected in the first quarter of 2019, growing a robust 0.5% due to a bigger than expected boost from businesses stocking up ahead of the long-anticipated March Brexit date.

But this boost is expected to go into reverse during the current quarter, with the Bank of England estimating growth of just 0.2% and some forecasters predicting a contraction.

Pantheon Macroeconomics's Samuel Tombs said he expected industrial production would pick up in the third quarter as car plants operated through the summer holiday period -- and that even if factory output remained weak, the sector was too small to push Britain's economy as a whole into recession.

"The much larger services sector stands to benefit from robust growth in households' disposable incomes," Tombs said.

(Reporting by David Milliken; Editing by Catherine Evans)

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