Manufacturing exports are running at their highest level in two years thanks to the pound's post-referendum slump, the CBI's latest Industrial Trends survey has revealed.
The survey of manufacturers, published this morning, also showed the overall health of the sector was better than expected, but firms predicted the prices they pay for materials will rise over the next year.
The CBI found 21 per cent of businesses said their export orders were running at "above normal" levels, while 27 per cent said they were below average. The balance of minus six points was the best performance since August 2014.
"The relatively upbeat tone … gives us another reason to be tentatively optimistic about the extend to which the economic has taken a hit from the referendum outcome," said Paul Hollingsworth, UK economist at Capital Economics.
Encouragingly, more manufacturers also told the CBI they expect orders to grow over the next three months, despite any uncertainty caused by the UK's vote to leave the EU. In total, 30 per cent of firms think their output will increase, compared to 19 per cent who are preparing for it to dip.
Anna Leach, head of economic analysis at the CBI said: "It's good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in sterling is helping to bolster export orders."
The findings stand in contrast to other prophecies of a prolonged slowdown in manufacturing following the referendum. Several indicators including the purchasing managers' index (PMI) showed the sector, which has entered recession three times in the last decade and is still off its pre-crisis peak, was set for a sharp contraction following the vote.
With more firms expecting prices to rise faster than at any point since February 2014, the CBI's Leach warned: "The pound's weakness is a double-edge sword, as it benefits exporters but also pushes up costs and prices."