Factories show growth signs after ‘tricky’ start to year

The CBI said there were positive signs for the manufacturing sector. Picture: John Devlin

The CBI said there were positive signs for the manufacturing sector. Picture: John Devlin

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The outlook for the UK manufacturing sector has improved after orders hit a ten-month high in June, but Brexit concerns offset benefits of a weaker pound, according to new data.

The CBI’s latest monthly industrial trends report, covering more than 480 manufacturers, found that demand in the sector was stable and

output continued to grow “at a solid pace”.

The order book balance improved to -2 this month from -8 in May, marking the best reading since August, with stronger books in the three months to June spearheaded by food and drink, as well as motor vehicles and transport.

Overall, 30 per cent of businesses reported a rise in output volumes, and 19 per cent a decrease, giving a balance of +11.

Export orders remained unchanged in June, with a balance of -14 despite the recent drop in the value of the pound.

READ MORE: City fears slump in sterling and shares if Brexit vote wins

Rain Newton-Smith, chief economist at the CBI, said: “The recent fall in the pound appears to have done little for our exporters.

“It may be that the growing uncertainty in the run-up to the EU referendum, combined with global risks elsewhere, has offset some of the benefits of a weaker currency at this time.

“But while British manufacturers had a tricky start to the year, there are more positive signs as output and demand stabilise.”

Looking at the next three months, 35 per cent of companies expect a rise in output and 13 per cent a decrease, leaving a rounded balance of +23.

Kevin Caley, founder of lender ThinCats, said that while it is “heartening to see more optimism from Britain’s beleaguered manufacturers,” he flagged hurdles including “skills shortages, political uncertainty and inadequate access to finance” as well as “major export challenges”.

He added: “For smaller firms looking to grow, there are also far too many hurdles on the way to obtaining funding. Alternative finance is currently helping to clear this path, but if the sector is to continue its current momentum, more routes to finance must be opened.”

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