A second major survey this month has shown growth in the UK’s manufacturing sector at a three-year high, in a further sign the industry started the second quarter in strong shape despite fears of a 2017 slowdown.
The Confederation of British Industry’s monthly survey of 432 manufacturing groups showed 41 per cent of respondents had increased their output in the three months to May, compared to only 12 per cent who said it was down.
A rounded balance of +29 – the difference between the percentage reporting growth and those reporting decline – was the highest since December 2013.
Export orders in particular remained strong, with a balance of +10 maintaining last month’s level and the highest in more than three years.
Manufacturing has been a bright spot in recent data and surveys on the UK’s economy, as companies benefit from a sterling-induced “sweet spot”: the weaker pound has made British products more competitive internationally, but companies still have full access to markets until the Brexit process is complete.
IHS Markit’s purchasing managers’ index for manufacturing – another closely-watched measure of the sector’s health – also climbed to a three-year high last month.
However, the CBI once again highlighted rising cost pressures on firms, with large numbers of respondents expecting to raise their prices in the coming months.
Rain Newton-Smith, CBI chief economist, said:
The summer sun has come out early for Britain’s manufacturers. Robust demand at both home and abroad is reflected in strong order books, and output is picking up the pace.
On the other side of the coin though, we have mounting cost pressures and expectations for factory-gate price rises are running high.
Boosting productivity is key to alleviating some of the cost pressures that manufacturers are facing. Sustained investment in innovation and education will be vital to shore up the success of British industry.
Last month rising export orders helped optimism among respondents rise to its highest level since the UK joined the EU in 1973, though the brighter sentiment has done little to increase investment.