UK manufacturing finds new optimism

Confidence rose for the first time in two years

The struggling UK manufacturing sector is beginning to show signs of recovery, according to the Confederation of British Industry (CBI).

The deepest manufacturing recession for over a decade appears to be on the turn

Ian McCafferty, CBI

Its latest snapshot of industrialists' views showed that confidence among manufacturers had risen for the first time in more than two years.

The CBI said the change in sentiment had been triggered by the recent improvement in global trading conditions.

But it added that any recovery would be "fragile", and noted that orders, output and employment all continued to fall over the previous four months.

'On the turn'?

After remaining mired in recession for many months, an increasing number of indicators are now suggesting the manufacturing sector is heading for better times.

"The deepest manufacturing recession for over a decade appears to be on the turn," said the CBI's chief economic adviser Ian McCafferty.

Export orders are expected to rise over the next four months for the first time since January last year, and domestic orders are also due to increase for the first time in over two years.

"This is good news but any recovery at this stage will remain fragile," added Mr McCafferty.

"It will be some time before employment stops falling and firms start investing again."

Budget warning

The CBI also noted that views of businesses may have changed since last week's Budget.

Business leaders were angered by the raising of National Insurance contributions for employers.

"It is worth noting that the survey period was completed prior to the Budget, which added to employment costs for businesses of all sectors and sizes and regardless of their profitability," Mr McCafferty said.

"We cannot be sure that recorded optimism would have bounced back in this way, had manufacturers known what was in store."