The Confederation of British Industry says “made in Britain” firms are reporting order book levels not seen for almost 30 years – but there are fears about higher costs ahead.
The business lobby group’s monthly survey of the manufacturing sector added to evidence of a resurgence for UK factories, with 1995 the last time export order books were so high.
Total orders, which include domestic business, were at their best level since August 1988, led by growth in the food, drink, tobacco and chemicals sectors.
However, the CBI said companies were still warning of “sharp” rises in average selling prices – up by 23% in May.
The Brexit vote has proved a double-edged sword for the UK’s exporters.
While the collapse in the value of the pound since the referendum has made sterling-priced goods more attractive to foreign buyers, it has also raised the cost of importing any materials needed to produce the goods in the first place.
It has left manufacturers who rely on a supply chain overseas under pressure to recover those import costs to maintain profitability.
The CBI’s findings, which also included expectations of increased production, tally with other recent surveys on activity in the sector.
They have painted a rosier picture for the second quarter of the year. Official figures cover only up to April to date.
There is greater pressure on the manufacturing sector to perform as the UK economy endures a Brexit-linked slowdown – driven by weaker consumer spending as inflation rises.
:: The troubling rise and rise of inflation
UK plc has depended on the consumer for the bulk of its growth since the financial crisis but wage growth is now lagging the pace of price increases – hitting spending power.
Andrew Wishart, UK economist at Capital Economics, said: “The strength of June’s CBI Industrial Trends Survey suggests that the weakness in the manufacturing output in the hard data should prove to be a blip.”
He added: “(The) strong survey supports our view that solid manufacturing and export growth will help to offset the slowdown in consumer spending growth this year.”