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A recovering global economy and a weaker pound are boosting the manufacturing industry in the UK and they’re seeing the highest demand for products in three decades. The Confederation of the British Industry (CBI) recently released their latest Industrial Trends Survey which presented a snapshot of manufacturing demand vastly strengthening. Some of the key findings of the report include:

  • The highest level of total book orders for manufacturing firms since 1988 has been reported
  • 27% of manufacturers expect robust growth at the same pace in the second half of the year
  • Average selling prices are up 23% (and peaked in February at 32%)
  • 30% of businesses report their volume of output over the last three months is up
  • The highest balance of export book orders has been reported since 1995

There are a variety of reasons why UK factory output is on the rise and there are some other factors to consider for the future of business.

Increased Production

Britain’s manufacturers have increased manufacturing in the past few months at the fastest rate since the mid-90s. This type of growth in productivity naturally leads to more UK employment and an extra robust economy. The volume of UK factory output is also the highest it has been in over 20 years and continues to increase.

One of the reasons for the increase in production is the fall in sterling over the past year. A 12% exchange rate decline against the dollar has caused an already strong demand for manufactured goods and exports to rise even further. Manufacturers are also amassing more raw materials, at the strongest rate since the late 70s with high expectations for export growth steadily increasing.

Strong Performance

UK employment in the manufacturing sector is increasing as strong performance by the workforce continues to warrant more hiring. There cannot be major increases in output without the employees working hard to make it happen. British employees are stepping up to the challenge in high demand.

Certain industries, like food, drink and tobacco, are experiencing particularly strong increases in performance and have spearheaded a pick-up in orders in 13 of the 17 industrial sub-sectors that the CBI tracks each month. As a result, the number of companies reporting increases rose from 9% to 16% from April to May. This has been the highest shift since August 1988. Additionally, the balance for export orders is the highest it has been for 22 years.

Future Growth

The UK manufacturing sector will continue to report strong performance and robust growth throughout the rest of the year. Although there will be a slowdown in consumer spending, the solid export growth will serve to offset the majority of that loss.

Headwinds of high inflation may threaten this robust growth but UK employment continues to increase in line with demand. The continued fall in price of raw materials that manufacturers need for mass production will spur increases in productivity despite the lower purchasing power of consumers. Although the UK may be experiencing some setbacks in terms of the value of sterling, manufacturing may just be one sector that helps to save the UK economy from trouble.