Manufacturing grows at fastest rate in two decades

Rain Newton-Smoth of the CBI
Rain Newton-Smoth of the CBI

UK manufacturing output grew at the quickest rate since January 1995 over the last quarter, sparking the sector’s biggest hiring spree in three years.

The latest Confederation of British Industry (CBI) industrial trends survey showed that 43% of firms saw output volume grow in the three months to July, compared to 12% which reported a drop, giving a balance of 31%.

That was the highest balance for output on record in over 22 years.

CBI chief economist Rain Newton-Smith said: “Output growth among UK manufacturers is the highest we’ve seen since the mid-90s, prompting the strongest hiring spree we’ve seen in the last three years.”

The poll - which surveyed 397 businesses - found that 32% hired extra workers over the past three months, while only 13% saw headcounts drop, leading to a balance of 18% which is the highest level since July 2014 when the survey recorded a balance of 26%.

The survey also highlighted a drop in input cost pressures, with only a balance of 20% reporting a rise in unit costs in the last three months, compared with 45% in the three months to April.

That trend is expected to continue, with a balance of 5% of businesses predicting a rise in unit costs going forward, versus 41% in the previous quarter.

Companies also expect factory gate price inflation to be “more subdued”.

A brighter outlook among manufacturers is prompting further investments in worker training, which is forecast to increase at the strongest rate since January 2015.

A balance of 28% of firms are forecasting a jump in output volume over the next three months, compared to 16% back in April.

Expectations for both domestic orders are now the most upbeat since April 2015, while the expected growth in export orders - at a balance of 28% - is at its highest level in 40 years.