Domestic orders power manufacturing recovery, says CBI Survey

The recovery in British manufacturing continued apace in the last quarter, with faster growth in domestic orders and output, according to the latest CBI quarterly Industrial Trends Survey.

The survey of 481 firms reported robust growth in orders in the three months to July. Total order book growth edged up on last quarter’s 19-year high, whilst domestic orders rose at their fastest pace since 1988, although export orders were flat. Numbers employed in the manufacturing sector also continued to rise strongly.

Firms are upbeat about the next quarter, with expectations for total new orders growth at their strongest since 1977, and export orders set to rebound.

Looking to the year ahead, manufacturers’ plans for investment in product and process innovation are at their strongest since 1989, with robust plans for spending on plant and machinery, and buildings. The number of firms investing to expand capacity reached a record high (since 1979).

However, the proportion of firms concerned that political and economic conditions abroad may limit export orders rose sharply to a five-quarter high.

“The recovery in the manufacturing sector is keeping a good pace,” said Katja Hall, CBI Deputy Director-General.

 “Industry is performing well as orders and hiring are on the up, and investment intentions for the year ahead are looking healthy across the board.

“It is not all plain sailing however, and there are still risks to the recovery. These include increasing international political instability, and the recent rise in sterling, which could be weighing on exports. We need to continue to help manufacturers to export their products to high-growth markets across the globe, to give a healthy and sustainable boost to the UK’s recovery.”

Commenting on today’s CBI Industrial Trends figures, Robin Johnson, head of diversified industrials at law firm Eversheds, said:

"The UK's standing as an innovative provider of high quality, niche, technical R&D solutions is being cemented throughout the world. Indeed, we are seeing it as a recurring theme in conversations with clients and industry leaders around the globe."Sterling however is a notable issue and is affecting exports, the key question being as ever, which counterparty should take the currency risk?

"Ultimately, when compared with the Eurozone, the UK remains a bright spot in western Europe for manufacturing.”