Belfast Telegraph

Strength of pound may hit growth of industry

By Roger Baird

The UK's manufacturing recovery has "rebuilt some steam" after latest figures from the CBI showed growth in order books rose strongly in the three months to August.

But the business group also said output growth had slowed and warned that a stagnant eurozone and strong pound could hit exports.

The CBI's Industrial Trends survey of 414 manufacturers found 29% reported order books above normal and 18% below, giving a balance of plus 11% in the three months to August.

This was up from 2% last month and equalled the level recorded in June. It was last better in December.

Export orders were still struggling, with a balance of minus 3%, though this was an improvement on minus 16% the previous month.

Output volume growth showed a balance of plus 12%, down from plus 23% in July.

The outlook of firms remained upbeat with a balance of plus 31% saying they expected output to improve over the next three months, up from plus 26% a month ago.

Last week Stephen Kelly, the chief executive of Manufacturing NI, said "high energy costs and unfavourable exchanges rates" were hitting the competitivity of Northern Ireland exporters – and were even losing out to competitors in the Republic as a result.

CBI deputy director-general Katja Hall said: "The outlook for UK manufacturers remains healthy, with both total and export orders firming up. Despite a dip in the pace of output growth, companies expect a strong pick-up in the next three months.

"But with growth flat at best in the eurozone and sterling having risen in recent months, there are still some headwinds to export demand.

"We need more manufacturers exporting to high-growth markets, which will help to put the recovery onto a more balanced, sustainable footing."

Despite the wider economic recovery, the sector remains well behind its pre-recession peak in 2008. Latest official data showed it managed just 0.2% growth in the second quarter.

Capital Economics assistant economist Paul Hollingsworth said the survey "indicated that the manufacturing recovery has rebuilt some steam in the third quarter".

But the figures also indicated that "the industrial recovery looks set to remain domestic-led" with other evidence suggesting that the strength of the pound was stifling exports, he added.

"So, the manufacturing recovery looks set to be strong, but not spectacular for now," Mr Hollingsworth said.

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