Manufacturers are enjoying some of the strongest levels of growth in more than two decades, according to a closely-watched survey that suggests the economic upturn is becoming less dependent on the dominant services sector.
However, financial data firm Markit said it may take more than a year before the manufacturing sector stages a complete revival, as it remains 7.5 per cent smaller than its peak before the financial crisis struck in 2008.
The figures were published as a separate report showed growth among US manufacturers fell to its lowest level since February.
Markit’s UK Purchasing Managers’ Index (PMI), compiled for the Chartered Institute of Purchasing & Supply (Cips), delivered a reading of 57 for May, down from 57.3 the previous month but well above the 50 mark that separates growth from contraction.
Rob Dobson, senior economist at Markit, said the sector is growing at a quarterly rate of almost 1.5 per cent, with output and new orders experiencing one of the brightest spells in the survey’s 22-year history.
He added: “However, with manufacturing still some 7.5 per cent smaller than its pre-crisis peak, even at this current growth rate it would take until late 2015 to achieve full recovery.”
The upturn is being enjoyed by small businesses and large-scale producers, while a sharp re-acceleration in demand for goods such as plant and machinery points to ongoing growth of business investment.
Andy Hall, head of corporate banking in Scotland for Barclays, said: “As we move further into 2014 and levels of optimism begin to grow, we could start to see increased activity in the mergers and acquisitions space as manufacturers look to further drive cost efficiencies and find more ways to expand into growth markets.”
The benefits of the manufacturing upswing are also being shared with the wider economy, as employment increased for the 13th month running.
Neil Prothero, deputy chief economist at EEF, the manufacturers’ organisation, said the sector was on track to expand for a fifth consecutive quarter, its strongest performance in four years.
He added: “Signs of a pick-up in export orders are especially welcome, as the broader rebalancing story still requires a significant boost in net trade to support the recent rebound in business investment.”
The Markit/Cips survey came as Bank of England figures showed a continued fall in lending to businesses last month, with some observers warning that firms are being “stifled” by a lack of credit.
Net lending shrank by almost £2.4 billion in April, following the previous month’s £2.5bn contraction, despite a recent Bank survey reporting an improvement in credit availability.
Total loans made to small- and medium-sized enterprises (SMEs) dropped by £629 million, although this was an improvement on the £1.1bn slump reported for March.
Howard Sears, director of small business investor Astuta, said: “For many SMEs, the credit crunch is still raging.”