British manufacturers are growing at the fastest pace in more than three years, helped by the fall in the value of the pound after the Brexit vote and a recovery in core markets, according to figures from manufacturing organisation EEF and consultancy BDO.
The latest quarterly survey showed that UK firms reporting growth had risen to 31% in the first quarter, the highest level since the third quarter of 2013. Meanwhile, the balance of firms expecting growth in the second quarter rose to 33%.
The growth came against the background of a decline in the value of the sterling after the Brexit vote, which made UK products cheaper. While this had its negatives such as higher input costs, manufacturers said they offset the same by increasing their prices.
"The post-referendum wobble that defined UK manufacturing's performance in the second half of 2016 has been left firmly behind with manufacturers now rallying far more strongly than even they had predicted," said EEF chief economist Lee Hopley.
"The sharp rebound in exports has been instrumental in helping firms regain ground and, with investment, employment and confidence all on the up, the picture now is of a sector not quite in peak health, but certainly making a positive contribution to UK growth this year."
The EEF raised its forecast for growth in the sector to 1.0% this year, from a previous estimate of a 0.2% contraction, and it also increased its estimate for British economic growth as a whole to 1.8% from 1.3%.
Last week the seasonally adjusted Markit/CIPS Purchasing Managers’ Index (PMI) posted 54.6 in February, a three-month low. This lead to some experts to voice concerns that the manufacturing sector is showing the first signs of slowdown since last summer.
“Some exporting manufacturers are taking the opportunity to review their international trade strategies and look beyond the EU, especially taking advantage in the short term of the devaluation of sterling making our exports more competitive,” said Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking. “Firms are also becoming more skilled at dealing with unexpected geopolitical events.”
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