Factory power helps economy

BRITAIN’S economic prospects received a boost as factory orders improved in the three months to June.

A CBI survey showed order books strengthened and output continued to expand as manufacturers weathered uncertainty over the EU referendum and a weak export market.

The balance of businesses reporting an increase in orders compared with those seeing a fall narrowed to -2 per cent from a previous -8 per cent in May.

The improvement was due to domestic demand, with motor vehicles, transport and food and drink sectors leading the way.

Manufacturing, which makes up about 10 per cent of UK economic output, has been shrinking for a year.

CBI economist Rain Newton-Smith said: “The recent fall in the pound appears to have done little for our exporters. It may be that global risks elsewhere have offset some of the benefits of a weaker currency at this time. But while British manufacturers had a tricky start to the year, there are more positive signs as output and demand stabilise.”

Howard Archer, chief UK economist at IHS Global Insight, said: “This is a relatively decent survey that adds to recent signs that the manufacturing sector may finally be seeing some improvement in its fortunes after a difficult 2015 and challenging start to 2016.

“Hopefully, a more competitive pound can increasingly feed through to help UK exporters.”

Having previously feared UK economic growth could slow to 0.2 per cent in the second quarter from 0.4 per cent over the previous three months, Archer now believes the improving manufacturing picture, combined with robust retail sales, could help GDP growth edge up to 0.5 per cent.