Weak pound boosts exports to highest level since 2014

Domestic demand grew modestly in the past quarter, finds CBI study

Manufacturing output and orders grew over the past quarter, with export volumes growth the strongest for two-and-half years, according to the latest quarterly CBI Industrial Trends Survey.

The survey of 459 manufacturers revealed that a balance of +9% reported an increase in output in the quarter and the same balance reported an increase in total orders. A balance of +8% said export orders had risen in the quarter, the highest since April 2014. However, domestic demand grew modestly.

It found that competitiveness in EU markets rose at the fastest pace since the series began in 2000 (+34%), with competitiveness outside the bloc also improving at the quickest rate since 2009 (+17%).

Unit costs rose at their fastest pace in three years following sterling’s sharp depreciation, 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. 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.

Rain Newton-Smith, CBI chief economist, 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.

“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,” added Newton-Smith.