Factory orders hit two-year high despite slowdown fears

Industry continues to grapple with the falling value of sterling
Industry continues to grapple with the falling value of sterling

Britain’s manufacturers have seen factory orders jump to their highest level in more than two years despite concerns that the UK economy is slowing, according to a report.

The Confederation of British Industry (CBI) Industrial Trends Survey said total order books beat expectations to plus 9% in May, up from plus 4% in April, its biggest rise since February 2015.

Output growth recorded its fastest rise since December 2013 at plus 28%, thanks to a strong performance from the mechanical engineering and chemicals sector.

Exports orders also equalled a four-year high last seen in March, reaching plus 10%.

However, the industry continued to grapple with pressure on prices, as the Brexit-hit pound pushes up the cost of imported materials.

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.”

The survey, which gathered responses from 432 manufacturers, said 37% of firms are expecting robust output growth over the coming quarter, with 10% expecting a decline, leaving the balance at plus 28%.

The latest manufacturing figures from the ONS showed output fell 0.6% in March, but recent industry surveys have painted a brighter picture.