Fresh evidence of an upturn in the manufacturing sector emerged yesterday, after a survey found export order books at their fullest for almost three years.
Output is also expected to grow for the first time in a year, the CBI said in its monthly trends survey.
The employers’ organisation said it was clear UK manufacturers were still struggling, but added that conditions had shown signs of improvement.
Out of 886 firms involved in the survey, 11 per cent said their export order books were above normal, while 32 per cent said they were below. The balance of minus 21 per cent compares with minus 27 per cent in November, and is the best since January 2001.
Including domestic orders, the balance of minus 19 per cent is the highest level since June of last year.
CBI head of economic analysis Doug Godden said: ‘Manufacturers are still facing a really tough uphill battle, with over a third saying order books remain below normal. But the survey suggests conditions are slowly getting better.’
For the first time since January, more manufacturers said output would rise over the next three months than said it would fall. The balance of plus five per cent does not represent substantial growth, but is still the strongest since October 2002. The CBI added that manufacturers’ prices, which have not made any significant progress for nearly seven years, were expected to continue to fall, albeit at the slowest since January 2001.
Meanwhile the financial systems of the world in general, and Britain in particular, have become more stable over the past six months as the world economy has improved, the Bank of England said yesterday.
But the bank cautioned in its twice-yearly Financial Stability Review that the rapid build-up of household debt in Britain and elsewhere could be storing up trouble for the future even though the current situation was manageable.
The bank’s Monetary Policy Committee, which sets interest rates, has made clear it is nervous about putting borrowing costs up too rapidly for fear it could cause a debt crunch among consumers and a collapse in spending.
The review also noted that there had been a significant build-up in hedge fund activity in the past six months, although without any identifiable problems at this stage. Hedge funds are highly- leveraged institutions often willing to take greater risk than conventional investment funds.
The review called on financial authorities to monitor any vulnerabilities carefully. It was the Long-Term Capital Management crisis that almost brought the world financial system to its knees.
