The UK manufacturing output and orders grew over the last quarter, with export volumes growth the strongest for two and half years, according to the latest quarterly Confederation of British Industry (CBI) Industrial Trends Survey.

The survey of 459 manufacturers reveals that competitiveness in European Union (EU) markets rose at the fastest pace since the series began in 2000, with competitiveness outside the bloc also improving at the quickest rate since 2009.

Domestic demand grew modestly, while export orders rose for the first time in over a year. The outlook for demand over the next three months is generally positive, with export orders expected to rise further, along with more modest growth in domestic orders. But concerns persist about the availability of skilled labour, with almost a quarter of respondents observing that skilled labour availability could limit output over the next few months, it said.

Optimism about the business situation fell slightly again following last quarter’s sharp decline. And numbers employed fell slightly for the first time since 2010 and look set to fall faster over the quarter ahead. But investment intentions improved following the decline last quarter, and investment plans for the year ahead are now more firmly above their long-run averages, it added.

Following sterling’s sharp depreciation, unit costs rose at their fastest pace in three years, and are expected to continue growing at above their long-term average over the quarter ahead. This was accompanied by modest domestic price inflation, as manufacturers sought to pass on some of the cost increase to their customers.

Additionally, despite welcome signs of improved export demand and competitiveness, the majority of exporting manufacturing firms have said that the fall in the pound since June has had a negative impact on their business. In a supplementary question asked alongside this month’s survey, 47 per cent of manufacturing firms cited sterling’s depreciation as having a negative impact, against 32 per cent citing a positive impact.

Rain Newton-Smith, chief economist, CBI, said: “Manufacturers’ are optimistic about export prospects and export orders are growing, following the fall in Sterling.”

“However, the weaker Pound is also feeding through to costs, which are rising briskly and may well spill over into higher consumer prices in the months ahead,” he said.

“Access to skills clearly remains a high priority, so manufacturers will be looking to the government to implement a new migration system that meets the needs of business while responding to clearly-stated public concerns. Maintaining a preferential route between the UK and the EU, our largest trading partner, will be important,” he added.

“Meanwhile, firms will be seeking further details on a long-term, industrial strategy from the Autumn Statement that combines sectors and places. Ultimately, all businesses need greater clarity from the government on the fundamental issues of skills and barrier-free access to EU markets as soon as possible,” he concluded. – TradeArabia News Service