Rally in export orders boosts UK industry

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Manufacturers’ order books have swelled to a six-month high in a further sign the sector is making up some of the ground it lost last year.

Data released on Thursday from the CBI’s monthly industrial trends survey showed companies’ total order books strengthening, with a rally in export orders and robust domestic demand.

Twenty-six per cent of companies reported total order books to be above normal and 16 per cent said they were below normal, giving a positive balance of 10 per cent.

This was comfortably above the 6 per cent expected by analysts polled by Reuters.

Rain Newton-Smith, economics director at the CBI, said that manufacturers “have more of a spring in their step” and were “regaining some of the momentum lost towards the end of last year”.

“The drop in oil prices is good news for the manufacturing sector in the UK, bringing with them lower operating costs, but North Sea producers are clearly suffering,” she said.

Samuel Tombs, senior UK economist at consultancy Capital Economics, said the figures suggested the “revival is back on track”.

Hopes the UK manufacturing sector would provide a meaningful contribution to the overall economic recovery dimmed last year, as the strong pound and weakness in the eurozone hit exports.

Official data showed manufacturing output slowed progressively throughout 2014, but strong domestic demand helped ensure the sector finished last year 2.7 per cent larger than the previous year.

However, the sector remains 5.4 per cent below its pre-downturn peak.

Howard Archer, chief UK economist at IHS Global Insight, said it was a very encouraging survey that signalled the sector was likely to see a decent first quarter.

“A major plus for manufacturers is that recent sharply falling input prices are allowing them to price competitively to gain business,” he added.

The separate Markit/CIPS purchasing managers survey published this month showed that manufacturers’ purchasing costs fell at the steepest rate since May 2009.

The Office for National Statistics on Wednesday published estimates of regional output. These showed that Manchester was the fastest growing part of the country in 2013 — gross value added, a measure related to gross domestic product, grew 4.6 per cent.

It was followed by other manufacturing hotspots the Black Country, Greater Birmingham and Solihull, and the southeast Midlands, all ahead of London.

Luke Raikes, research fellow at think-tank IPPR North, said that while the figures showed the “significant potential” for economic growth and prosperity in the north, questions remained about economic resilience.

“This growth did not feed through to significant job creation during that same period, and the link between economic growth, wages and jobs has become more tenuous,” he said.

Additional reporting by Gavin Jackson

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