UK manufacturing starts new year in strong position

Boost to competitiveness from the weak exchange rate has been a key driver of the recent turnaround

British manufacturing growth climbed to a two-and-a-half-year high in December, fuelled by the Brexit-hit pound, which continued to boost demand by making UK exports cheaper on the international market.

The Markit/CIPS UK Manufacturing Purchasing Managers Index (PMI) rose to 56.1, the strongest reading since June 2014, from 53.6 in November. A reading above 50 indicates growth.

The manufacturing PMI showed domestic and export order books grew, but so did cost pressures facing factories - something that will increasingly feed into consumer prices next year.

Rob Dobson, senior economist at IHS Markit, said: “The UK manufacturing sector starts 2017 on a strong footing. The headline PMI hit a two-and-a half year high in December, with rates of expansion in output and new orders among the fastest seen during the survey’s 25-year history.

“The boost to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaround, while the domestic market has remained a strong contributor to new business wins,” he added.