UK manufacturers see output and orders rise

UK manufacturers painted an upbeat picture of output and new orders over the past three months, new data from the Confederation of British Industry shows.

Strong growth in production led to constraints on companies’ production capacity and pushed up hiring in the quarter to April, while firms pushed up their selling prices to cover the soaring costs of raw materials.

Over the quarter, a net 20 per cent of manufacturers saw growing output as both domestic and export orders increased. A net 24 per cent of companies said export orders grew – the fastest rate since April 1995.

But a net 53 per cent of firms said average unit costs had gone up, the highest since October 2008, leading 29 per cent to raise domestic prices and 30 per cent to up export prices in response.

A total 55 per cent of companies said they were working at below capacity – down from 62 per cent a year ago – while 29 per cent said lack of plant capacity may constrain their output in the coming quarter, up from 14 per cent in April 2010.

“The manufacturing recovery remains firmly on track. Strong demand at home and abroad and rapid restocking over the past quarter have led to another solid rise in production, with growth expected to continue over the next quarter,” said CBI director-general John Cridland.

April’s monthly result gave economists some cause for concern, as it showed a dip in order books for a net 11 per cent of firms – those who said orders rose minus those who said they fell).

April’s result was a fall from March, where a net five per cent of firms said their order books rose, but is a more volatile set of results.

“It appears that both domestic and foreign demand lost momentum in April as the export orders balance retreated,” said IHS Global Insight chief UK economist Howard Archer.

“The concern is that manufacturers will find life increasingly challenging over the coming months as stock rebuilding wanes and tighter fiscal policy weighs down on domestic demand.”