'Recovery well under way' for factories

BRITAIN'S once beleaguered manufacturing sector appears to be staging a comeback as CBI research yesterday raised hopes of a "solid" rise in production over the next three months.

• Ian McCafferty: 'Outlook for manufacturing encouraging'

The CBI's industrial trends survey is the latest in a string of studies pointing to a manufacturing resurgence after the sector had been in sharp decline since the Seventies.

A third of manufacturers told the CBI they are expecting a rise in output over the next three months, with only 19 per cent bracing themselves for a fall. The resulting balance of 13 per cent is a sharp improvement on the 4 per cent recorded last month.

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Manufacturers also reported strengthening order books, with 27 per cent saying orders were above normal for this time of year - driven mostly by demand from overseas as exporters benefit from a weak pound.

While 31 per cent admitted they had expected higher orders for December, the balance of 3 per cent is the strongest figure recorded since June 2008.

Ian McCafferty, CBI chief economic adviser, said: "These figures show that the recovery in the manufacturing sector is well under way.

"The outlook for UK manufacturing output growth is encouraging. The past sharp depreciation of sterling should continue to underpin demand for UK exports into 2011."

While the CBI also warned of mounting cost pressures - particularly from commodity prices - the survey followed a number of other studies pointing to an improvement in the sector's fortunes.

The Office for National Statistics said manufacturing output rose to its highest level for seven months in October while the Engineering Employers Federation said manufacturers were "powering ahead".

Peter Hughes, head of Scottish Engineering, said businesses were finally reaping the rewards of restructuring exercises undertaken during the past decade. "A lot of Scottish manufacturing companies have been working hard making themselves leaner and fitter," he said.

Howard Archer, chief UK and European economist at IHS Global Insight, called the latest CBI survey "excellent". He said: "The strong pick-up in orders in December boosts hopes that manufacturing activity will hold up well in the early months of 2011."

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However David Lonsdale, assistant director of CBI Scotland, urged the Scottish Government not to damage the sector through its business rates regime. "The competitiveness of, and prospects for, Scottish industry are strengthened when the public sector keeps a tight lid on those costs under its control and influence that affect business."That is why we are calling on the devolved government to ensure it maintains poundage rate parity with the rest of the UK when it makes its announcement on business rates for the coming year."

Finance secretary John Swinney will today make his local government finance statement for 2011-12 - traditionally the occasion when the Scottish Government reveals the poundage rate for the coming year.

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