Brexit boom for Britain as factory orders hit their highest level for nearly 30 years
BRITISH factory orders have hit their highest level for nearly 30 years, the CBI business organisation revealed today.
The figures will fuel optimism for Britain’s economic future as we prepare to leave the European Union.
They also bear out analysis that the fall in the value of the pound since the EU referendum a year ago today, on June 23, 2016, has significantly boosted industry and particularly exporters.
The CBI’s monthly Industrial Trends Survey said total orders in June hit their highest level since August 1988 and were much stronger than many economists had predicted.
Export orders hit a 22-year high, helped by the cheaper pound.
Factory output slowed in the past three months but remained “robust” by historical comparisons and firms expect production to rise over the coming quarter.
The survey of 464 manufacturers found broad improvements in 13 of 17 sectors, led by food, drink, tobacco and chemicals.
Companies also expect a sharp rise in average prices, continuing a trend of rising inflation and adding to pressure for the Bank of England Monetary Policy Committee to raise interest rates.
CBI chief economist Rain Newton-Smith commented: “Britain’s manufacturers are continuing to see demand for ‘Made in Britain’ goods rise with the temperature.
“Total and export order books are at highs not seen for decades, and output growth remains robust.
“Nevertheless, with cost pressures remaining elevated it’s no surprise to see that manufacturers continue to have high expectations for the prices they plan to charge.
“To build the right future for Britain’s economy, manufacturers and workers, the Government must put the economy first as it negotiates the country’s departure from the EU.
“This approach will deliver a deal that supports growth and raises living standards across the UK.”
Richard Tice, co-chairman of Leave Means Leave said: “This is yet more great economic news, thanks to Brexit.
“It is a delicious irony that it is from the CBI, one of the biggest Brexit doomsayers.”
More than a quarter, 27 per cent, of manufacturers said their total orders were higher than normal, with about 12 per cent saying they were lower than usual, giving a “balance” when rounded up of plus 16 per cent, the highest since 1988 when it was plus 17 per cent.
Nearly a quarter, 23 per cent, had above normal export orders and 10 per cent less good, giving the highest balance since June 1995.
Thirty per cent of firms said output rose over the past three months and 15 per cent that it fell, but 37 per cent expect growth in the coming three months.
Members of the Bank of England’s interest rate-setting committee are increasingly attracted to raising the rate, with rising exports and investments a factor.
But Bank Governor Mark Carney says he want to see first how the economy copes with Brexit uncertainties, while the fact that wages are lagging behind inflation is seen as showing no need for a rate rise.
Economist Philip Shaw of Investec said the CBI survey might marginally add to the case for a rate hike but he stressed manufacturing still accounted for only about 10 per cent of the economy.
Howard Archer, of the EY ITEM Club, said the survey looked “highly encouraging” but he also urged caution.
“Total order books … points to healthy domestic demand despite concerns of a stuttering UK economy,” he said.
“Export orders are at a 22-year high, clearly benefiting from a weakened pound and strong global growth.
“Taken at face value, the survey suggests that the manufacturing sector has had a strong second quarter and has considerable momentum going into the third quarter
“However, there is the concern that survey evidence for the manufacturing sector has tended to be markedly more upbeat than the official data from the Office for National Statistics so far in 2017.
“On the positive side, the overall substantial weakening of the pound and improved global demand should buoy UK manufacturers competing in foreign markets.
“The weakened pound could also encourage some companies to switch to domestic sources for supplies, which may help manufacturers of intermediate products.
“However, increased prices for capital goods and big-ticket consumer durable goods, diminished consumer purchasing power and uncertainty over the economic and political outlook could hamper manufacturers.”
June 22nd, 2017: Express