Record high export orders drive British manufacturing boom

British manufacturers are booming thanks to a weak pound in the wake of the EU referendum which has driven export orders to record highs, while the construction sector is languishing at a 12-month low.
Fresh economic data highlighted the disparity between the two sectors, with the UK’s factories soaring as the currency rates mean foreign customers are snapping up cheap products.
However, construction is suffering, with purchasing manager’s index (PMI) numbers showing the sector is barely growing as commercial work declines and future orders dry up because of Brexit uncertainty.
Record high export orders drive British manufacturing boom

Construction PMI
Manufacturing industry trade body EEF’s quarterly survey showed that output soaring and orders at a record high, boosted by sterling’s weakness which makes British-produced goods less expensive to overseas buyers.
Output in the third quarter hit a level of +34pc, as more companies reported a rise than decline, up from a level of +26pc in the previous period.
Overall orders jumped to a historic high of +37pc, 12 percentage points up on the previous period, though this was heavily driven by export demand.
While manufacturers were positive about foreign sales, they were less optimistic about home markets with confidence about the UK’s prospects dropping for a second consecutive quarter.
“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,” said Lee Hopley, EEF chief economist, though she warned the sector is likely to be at its peak.
“We are likely to see a more stable picture in the coming months rather than any further significant acceleration,” Ms Hopley added, warning that “Brexit is likely weigh on sentiment with uncertainty over the UK’s terms of exit”.
Tom Lawton, partner at BDO which worked with EEF on the research, added: “Despite the economic and political uncertainties, manufacturers’ continue to be a force to be reckoned with, increasing both investment and employment plans to make the most of the strengthening export opportunities available to them.”
Record high export orders drive British manufacturing boom

On its knees: Falling commerical activity failed to offset a boom in residential construction

The positivity did not extend to construction, however, with the PMI reading which gives an insight into the health of the sector at a grassroots level dropping to a level of 51.1 in August, down from 51.9 the previous month.
A number above 50 indicates expansion, and below that level signals contraction.
The last time the construction PMI was at this level was a year ago.
Robust growth in the residential construction sector as Britain struggles to build enough homes could not offset the decline in the commercial world, according to Markit.
The data also hinted at what was described as a “sustained soft patch ahead” as new business volumes fell for a second month, though the decline was not as marked as the one seen in July.
Commenting on the “lacklustre growth conditions”, Tim Moore, associate director at Markit, said: “Civil engineering work stagnated, which meant the sector was reliant upon greater housebuilding activity to deliver an expansion in construction volumes.
“Respondents noted the subdued business investment and concerns about the UK economic performance had led to a lack of new work to replace completed projects, especially in the commercial sector.”
Record high export orders drive British manufacturing boom

The decline was attributed to worries about the future of Britain’s economy as ministers attempt to thrash out a deal with the EU about leaving the trading bloc.
Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply, said: “The sector hit a roadblock this month as purchasing activity slowed for the third month and new business wins were hard to come by. Reduced Government spending, economic uncertainty and Brexit-delayed decision-making were largely to blame.”
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