Exports support manufacturing growth

The group’s latest quarterly Industrial Trends Survey revealed a stronger-than-expected rise in output in the three months to January, with 31 per cent of the 461 manufacturers surveyed claiming that output rose during the three-month period.

However, the CBI warned that the outlook for the sector remains uncertain, with domestic demand still weak and firms struggling to access finance. Domestic demand was weaker than expected with 18 per cent of manufacturers reporting a rise, and 26 per cent a drop in demand.

Nevertheless export orders rose for the first time since January 2008 with help from the weak pound and increasing global demand. The survey showed that 30 per cent of firms had experienced export growth during the quarter, while 24 per cent reported a fall.

Exports are expected to grow more strongly in the next quarter (+13 per cent), and 19 per cent of firms are the most optimistic about export prospects for the coming year.

Ian McCafferty, the CBI’s chief economic adviser, said: ‘After nearly two full years of falling output, manufacturers are seeing a return to modest growth, thanks in part to improved overseas demand and much slower stock reductions.

‘It is encouraging that the weaker pound is now providing firms with some respite as global demand improves. Exports are rising for the first time in two years, as UK-made goods are looking more attractive in overseas markets. Manufacturers are also feeling upbeat about export prospects for the year ahead.

‘However, the manufacturing sector is not out of the woods. With domestic demand still weak and credit remaining constrained for some companies, firms expect growth to be more modest in the next quarter. This underlines our view that the UK’s economic recovery will be slow and protracted.’

The survey also showed that the rate of job losses across the sector is slowing. A balance of -13 per cent indicated a drop in staff numbers during the quarter, an improvement on October’s balance of -34 per cent.

More than 10 per cent of firms surveyed said that they are planning on investing in more on training, while 15 per cent said they would invest in innovation.

The availability of finance remains a concern, and is cited by 13 per cent of firms as a factor likely to limit output, and by 12 per cent as likely to limit export orders. Despite this, sentiment about the overall business situation is continuing to improve, with 12 per cent of firms more optimistic than three months ago.