Export improvement in UK

According to the CBI’s latest Industrial Trends Survey, UK manufacturing shows continued signs of improvement with the balance of firms reporting healthy export orders the best for a decade.

According to the report, for the first time since February 1996 as many firms said export orders were above normal as below, driven by renewed demand for capital goods such as industrial engines and aerospace equipment.

On the back of the improved export situation, 22 per cent of manufacturers reported total orders were above normal compared to 34 per cent who said they were below normal, producing a balance of minus 12. Although negative, this maintains the slowly improving trend seen since the turn of the year and is comparable to April’s balance (-11), which was the strongest since February 2005 (-10).

Reflecting this picture of relatively healthy global demand, manufacturers expect the total volume of output to increase over the next three months (a balance of +10).

However, conditions in the UK’s domestic market remain difficult and despite the increased cost of metals and oil (up by 24.1% and 13.2% respectively over the survey period) manufacturers do not expect to be able to increase their prices over the next three months, putting further pressure on profit margins.

“The outlook for UK manufacturing is more encouraging than it has been for some time on the back of the stronger performance of eurozone economies and continued growth in the US,” said CBI Chief Economic Adviser Ian McCafferty. “However, while the signs are encouraging, the pick-up in domestic demand of earlier in the year has not been sustained and there is still little sign of an increasing appetite for British-made consumer goods. Until this happens the recovery will remain fragile.

“In the meantime profit margins remain under pressure as manufacturers feel unable to pass the sharp increases in energy and raw materials costs on to their customers.”