Publishing its latest purchasing managers' survey, the Chartered Institute of Purchasing & Supply said exports were helping to drive growth, writes Scott Reid.
The report's monthly headline activity index, where a score over 50 registers growth, showed a reading of 57.2 for March – up from 56.5 in February and the highest level since October 1994, when the economy was also emerging from recession.
The latest figure, calculated from data on new orders, production, employment and supplier performance, is also 20 points better than the low hit at the end of 2008 when output slumped during the credit crunch.
Jorg Radeke, an economist at the Centre for Economics and Business Research, said: "The latest data underlines that the manufacturing sector recovery is gathering speed and that the industry has the potential to be an engine of growth for UK plc."
Cips, which produces the PMI series in conjunction with analysts at Markit, said production rose for the tenth consecutive month in March, with the rate of increase at its highest level since July 1994 and the second-fastest in the 18-year history of the manufacturing survey.
Staffing levels declined slightly but Cips said firms had sufficient capacity to cope with the requirements of work on new and existing contracts. Companies also faced increased inflationary pressures during the month after purchasing costs rose at the fastest pace since September 2008.
Cips chief executive David Noble was upbeat, saying: "To see such a fast-paced recovery in the manufacturing sector is hugely encouraging. Exports are clearly a main driver of growth but we are also seeing recovery across the whole sector."
While most firms were holding employment levels steady last month, 15 per cent reported job cuts, due to cost-cutting and redundancies, and it is almost two years since there was net hiring.
This pressure was reflected in a study of 94 pay settlements covering almost 300,000 employees from IDS, which showed wage growth slowing to 1.8 per cent in the three months to February from 2 per cent in the previous three-month period.