By Kalyeena Makortoff
Optimism among British manufacturers has soared as domestic orders rose at their fastest pace since mid-2014.
The latest Confederation of British Industry (CBI) industrial trends survey showed that 37 per cent of businesses saw an increase in homegrown orders in the three months to January, compared to 21 per cent that reported a slump, giving a balance of 16 per cent.
This is the highest level for domestic orders since July 2014, when the balance was 23 per cent.
The poll, which surveyed 461 businesses, found that the total order books increased from a balance of 0 per cent in December to 5 per cent in January, the highest measure since April 2015. The pick-up in business boosted industry confidence, with 27 per cent of firms more optimistic about the general business situation than three months ago and 12 per cent less optimistic, given a balance of 15 per cent.
It brings manufacturing sentiment to its highest level since January 2015.
The CBI’s chief economist, Rain Newton-Smith, said UK manufacturers have been “firing on all cylinders” but warned that sterling’s collapse was starting to hurt the industry. The number of people employed in manufacturing rose in the three months to January. There are around 2.7 million peoplein the UK employed in the sector.
Costs from imported materials rose at the fastest rate in over five years, and companies are expecting further price pain over the next quarter.
“The weaker pound is driving export optimism for the year ahead, but is having a detrimental impact on costs for firms and ultimately for consumers,” Ms Newton-Smith said.
But the drop in sterling helped raise competitiveness in non-EU markets.
Yesterday the pound jumped to $1.26, its highest level in six weeks, as the dollar fell on fresh concerns over what US President Donald Trump’s protectionist stance would mean for global trade and markets.
Neil Wilson, senior market analyst at ETX Capital, said: “Clearly there is renewed optimism around the pound, but this seems a trifle foolhardy given we know so little at present about what the Brexit negotiations will be like.”
The UK economy is set to defy expectations of a Brexit-induced slump and cap off 2016 with robust growth when fourth-quarter figures are revealed today.
Economists believe official data for October to December will show the UK economy growing 0.5 per cent in the final three months of 2016.