UK factories enjoy pre-summer boost as output rises at fastest pace in three years

manufacturing
Domestic and overseas demand helped order books to swell to their highest since February 2015, while export orders matched the three year high seen in March. Credit: Reuters

British factories enjoyed the biggest rise in output in more than three years in the quarter to May, as the weaker pound continued to bolster exports, according to the Confederation of British Industry (CBI).

A survey by the business group showed robust growth in the mechanical engineering and chemicals sectors pushed output up at the fastest pace since December 2013.

Domestic and overseas demand helped order books to swell to their highest since February 2015, while export orders matched the three-year high seen in March.

The CBI's poll of 432 manufacturers showed bosses expected output to grow "at the same robust pace in the coming quarter", with 37pc predicting growth, compared with 10pc expecting a decline.

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."

Ruth Gregory, an economist at Capital Economics, said the data provided "another reason to be optimistic" about economic growth in the second quarter, following the UK's 0.3pc expansion in the first three months of 2017.

Official figures this week showed UK retail sales saw a revival in April, suggesting consumer spending was unlikely to grind to a halt this year, even as economists expect higher inflation to put the brakes on growth.

"The upbeat survey supports our view that the manufacturing sector should perform well this year and help to offset some of the slowdown in consumer spending growth," said Ms Gregory.

While the fall in the value of the pound since the Brexit vote has boosted Britain's competitiveness, it has also pushed up import costs.

The CBI's survey showed average selling prices were likely to keep rising, albeit at a steadier pace in the coming months, with factory gate price growth expected to have peaked in February.

“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," said Ms Newton-Smith.

Exporters are upbeat about prospects for the year ahead Credit: Bank

A survey by the Bank of England this week suggested exporters would enjoy a year of robust growth - both in value and volume terms, though output in the medium term was expected to be hit by bigger trade barriers.

Goods exporters were particularly upbeat about near-term prospects, with respondents citing the fall in the value of the pound and optimism about entry into new markets as factors that would push up export values, even as uncertainty over the UK’s future relationship with the EU exerts a drag on growth.

Please review our commenting policy