Manufacturing growing at fastest rate since 1995!

The Uk’s factory output has increased at its fastest pace in two decades according to a survey from the Confederation of British Industry (CBI), whilst export orders increased at their fastest rate since 2011. In addition, optimism about prospects for exports for the coming year climbed at the fastest pace in over four decades! For the full story please read the article below which appeared in The Daily Telegraph today.

Roger Mundy, Managing Director, Beardsley Theobalds. 25th April 2017

 

 

Manufacturing growing at its fastest rate for two decades

Britain’s factory output increased at the fastest pace since the 1990s as a combination of strong demand in the UK, a global economic recovery and the weak pound helped to boost sales.

The number of manufacturers ramping up production outweighed the number cutting back over the past three months by a margin of almost two to one, according to a survey from the Confederation of British Industry.

Export orders grew at the fastest pace since 2011, when the weak pound was combined with the end of the post-financial crisis recession.

Businesses expect that to continue – forecasts of overseas demand in the coming three months are at the highest level since 1995 – and are hiring more workers to meet that demand.

“Manufacturers reported that orders growth was the highest in over two decades in the three months to April, largely underpinned by a strengthening in exports on the back of sterling’s depreciation,” the CBI said.

“Indeed, optimism about prospects for exports for the coming year climbed at the fastest pace in over four decades. However, the weak pound also continued to push up cost pressures, prompting firms to hike their output prices further.”

Expectations of domestic demand growth are slowing, adding to their concerns.

Bank of England deputy governor Ben Broadbent last month said the industry was in a “sweet spot” as sterling had fallen sharply but Brexit had not yet happened, so nothing has changed in terms of the trading rules affecting UK companies.

But that may not last as companies are uncertain about the course of Brexit and the shape of trading rules after it takes place.

As predicted by Mr Broadbent, businesses are turning cautious on investment spending.

The proportion of companies planning to cut back investment now outweighs the number expecting to spend more, turning the CBI’s index negative.

Intentions to invest in plant and machinery are at the weakest level since 2011, while plans to invest in buildings have fallen to levels approaching the gloom that followed the EU referendum.

Businesses are still planning to spend more on training their staff, however.

Overall, economists expect the industry will add to Britain’s economic growth over the course of the year.

“We remain optimistic that the manufacturing sector should perform well this year, and should help to offset some of the slowdown in consumer spending,” said Paul Hollingsworth at Capital Economics.