Manufacturing exports have been boosted by the weaker pound, new data has found.
The latest quarterly CBI Industrial Trends Survey has revealed that export volumes grew to their strongest level in two-and-a-half years in the three months to October.
Domestic demand also saw modest growth, while export orders rose for the first time in over a year. Demand also looked positive, with export orders expected to rise further over the next three months. Domestic orders were also forecast to see more modest growth over the same period.
However, the depreciation of the pound has had some negative impact, with unit costs rising at their fastest pace in three years. These were also expected to continue growing in the next quarter.
This was accompanied by modest domestic price inflation, as manufacturers sought to pass on some of the cost increases to their customers.
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.
Manufacturers also raised concerns about the availability of skilled labour, with almost a quarter of respondents saying skilled labour availability could limit output over the next few months.
“Access to skills clearly remains a high priority, so manufacturers will be looking to the Government to implement a new migration system that meets the needs of business, while responding to clearly-stated public concerns. Maintaining a preferential route between the UK and the EU, our largest trading partner, will be important.”
Optimism over the business outlook fell slightly, with 20% of firms more optimistic and 28% less optimistic (-8%) following last quarter’s sharp decline (-47%).
Employment numbers fell slightly for the first time since 2010 and look set to fall faster over the quarter ahead. Of those surveyed, 23% said they expected employment to increase, while 28% expected it to decline, giving an average of -5%, which is the lowest level since April 2010 (-12%).
Despite increased demand and competitiveness with the EU, the majority of exporting manufacturing firms (47%) felt that the fall in the pound since June had had a negative impact on their business, compared with 32% citing a positive impact.
Newton-Smith added: “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.”