THE POUND climbed to a fresh high yesterday, rising to its strongest level against the dollar for five and a half years, as a bullish report from manufacturing firms suggested that the recovery was steaming ahead.
Sterling pushed to around $1.716 during the day. The latest survey of UK industrial companies by Markit and the Chartered Institute of Purchasing and Supply (CIPS) indicates the largest industrial expansion in 20 years, helping to drive the pound further upwards.
The purchasing managers’ index (PMI) reading came in at 57.5 last month, far above the neutral 50 mark that separates growth from contraction.
The figure also improved from May’s 57 and was the highest since November – when combined with the previous two months, manufacturing businesses are reporting the strongest growth quarter in two decades.
The pound has strengthened by about $0.20 in the past year, as the rapid recovery has become clear.
“The economy is firing on all cylinders right now. Manufacturing, services and construction are all growing rapidly,” said Berenberg economist Robert Wood.
Manufacturers are still indicating rapid employment growth, for the 14th month in a row, suggesting that unemployment will continue its significant decline in the months ahead.
“Following five consecutive quarters of employment growth, it seems companies are continuing to expand their workforce, although this comes with the challenges of securing the right skills,” said Lee Hopley of EEF.
Despite the strength of the sector overall, Tata announced yesterday that it planned to lay off 400 workers at its Port Talbot steel plant.
“Steel demand and prices are likely to be under pressure for some years. Our business rates in the UK are much higher than other EU countries’ and our UK energy costs will remain uncompetitive,” said Karl Koehler of Tata Steel’s, highlighting problems regularly raised by UK manufacturers.