Business

Manufacturing exports boosted by pound

Containers wait for export Image copyright Getty Images

Manufacturing exports have received a significant boost from the weakness of sterling, according to the the latest report from the CBI.

The Industrial Trends Survey showed that export volumes grew that their fastest pace for two and a half years in the three months to October.

The pound has fallen by nearly a fifth against the dollar since the EU referendum at the end of June.

Export orders are expected to rise further over the next three months.

However, manufacturers are worried about a potential shortage of skills. Nearly a quarter of the 459 firms which responded to the CBI survey said that "skilled labour availability" could limit output over the next few months.

"Manufacturers are optimistic about export prospects and export orders are growing, following the fall in sterling," said Rain Newton-Smith, CBI chief economist.

"However, the weaker pound is also feeding through to costs, which are rising briskly and may well spill over into higher consumer prices in the months ahead.

"Access to skills clearly remains a high priority, so manufacturers will be looking to the government to implement a new migration system that meets the needs of business while responding to clearly-stated public concerns.

"Maintaining a preferential route between the UK and the EU, our largest trading partner, will be important," she added.

Both manufacturing output and orders grew over the quarter.

Negative impact

However, the sharp depreciation in sterling has had its downside. Unit costs, pushed up by an increase in import prices, rose at the fastest pace in three years and are expected to carry on increasing in the next three months.

There has also been some "modest" domestic price inflation, as firms tried to pass on some of the cost increases to their customers.

So despite increased export demand and competitiveness not all companies felt that the fall in sterling had been good for them.

Of the 231 manufacturers who submitted an answer, 47% said the fall in sterling since June had had a negative impact on their businesses, while 32% said it had a positive impact and 19% said the effect was neutral.

'Clarity'

Looking to the three months to the end of December orders, both domestic and export, are predicted to increase.

However, more respondents expect employment to decline than expect it to rise before the end of the year.

The CBI says companies will be looking to next month's Autumn Statement by the chancellor of the exchequer for further details on long-term industrial strategy.

"Ultimately, all businesses need greater clarity from the Government on the fundamental issues of skills and barrier-free access to EU markets as soon as possible," said Ms Newton-Smith.

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