Britain's manufacturers ride the wave of a weaker pound

Helen Cahill
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Behind The Scenes At The Bristol Airbus Factory
Order books have been lifted to a record high (Source: Getty)

Britain's manufacturers are riding the wave of a weaker pound this summer, with exports lifting order books to a record high.

The UK's top manufacturing trade body says the sector is "making hay while the sun shines as exports go from strength to strength".

Read more: UK manufacturing hit a four-month high in August

The pound has plummeted against the euro this year, dropping from €1.19 in the second quarter to €1.08 today. Sterling's weakness has combined with a resurgent single currency, as the Eurozone rebounds from a torrid few years involving several fiscal crises across the bloc.

The EEF's latest survey, published this morning, reveals "concerns about a softening in consumer demand as rising inflation bears down on real incomes."

However, such fears have not prevented factory output, and the size of manufacturers' order books, soaring over the summer.

A positive balance of 33 per cent of manufacturers reported growing export orders in the last three months, the survey said. Total orders "reached a historic high of plus 37 per cent" in the third quarter, up from plus 25 per cent in the previous three-month period.

The balance of companies benefiting from an increase in output climbed to 34 per cent over the past three months, up from 26 per cent in the second quarter.

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Both balances, for orders and output, were at the most positive level seen since comparable records began to be collected in 1995.

Three-fifths of the companies surveyed reported positive demand from the EU, up from just under half (47 per cent) at this point last year, and twice the proportion of the firms citing Asia as the destination with the most growth opportunities.

Lee Hopley, chief economist at EEF, said: "Manufacturers appear to have taken the recent political upheaval in their stride and are taking advantage of growing world markets to make hay while the sun shines.

"The period is likely to be the peak, however, and we are likely to see a more stable picture in the coming months rather than any further significant acceleration."

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Britain's trade deficit has continued to climb in 2017, reaching an eight-year high this summer. But chancellor Philip Hammond has maintained the UK economy will adjust to sterling's devaluation as exporters boost output to take advantage of the weak currency.

"The short run effect of a depreciation of sterling would be expected to be a decline in our trade balance performance as we suck in more expensive, in sterling terms, imports," Hammond said in July.

"But over time, and there's signs the economy is doing this now, the economy will adjust, with exporters increasing their output to take advantage of weaker sterling and their greater competitiveness in international markets."

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