Optimism among UK manufacturers is high at the beginning of 2017, with the CBI reporting that the volume of domestic orders in the sector rose at its fastest pace in just over two years.
The organisation’s quarterly Industrial Survey showed that there was strong growth in domestic orders in the final quarter of 2016, with demand rising at a level not seen since July 2014.
And although export orders were below expectations, there was still growth reported in this area as well. The CBI added that expectations for output growth are strong for the coming quarter, with both domestic and export demand playing a role in the higher outputs.
Rain Newton-Smith, CBI chief economist, described the UK manufacturing sector as “firing on all cylinders right now”.
She also explained that, while a weaker pound has its downsides in some respects, it’s positive for manufacturing businesses because it’s “driving export optimism for the year ahead”, while noting that the downside comes in terms of costs for businesses and rising costs for consumers.
Among the key findings from the CBI survey are that 27 per cent of firms were more optimistic about the general business situation than three months ago, which represents a rise of 15 per cent on the previous quarter’s survey.
In addition, the research found that the proportion of firms working below capacity is currently 46 per cent, the lowest level since April 2015.
This all comes after the government unveiled its new Industrial Strategy designed to drive growth across the UK through investment in research and infrastructure. There was also emphasis on developing more skilled workers, which is something the manufacturing sector needs.
The CBI research found that nearly one quarter of respondents were concerned that a lack of skilled labour could have a negative impact on their output in the coming months.
In the green paper that sets out the new Industrial Strategy, several measures were proposed, including a challenge fund to encourage innovation in several areas, such as smart energy technology, robotics and artificial intelligence, and 5G mobile network technology.
There was also a commitment to helping more young people develop skills in the science, technology, engineering and maths (STEM) subject areas, as well as mention of a new system of technical education aimed at young people who do not pursue a university degree.
In total, ten strategic pillars were set out in the Industrial Strategy, which included investing in science, research and innovation; upgrading infrastructure; and improving procurement processes.
CBI director-general Carolyn Fairbairn described the modern Industrial Strategy as a “landmark opportunity to build a successful, modern economy as the foundation for a prosperous, fairer and more inclusive society”.
She added that her organisation welcomed the government’s efforts to involve representatives from all the UK’s industries, and hopes that together they will be able to deliver the desired impact.
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