Manufacturing at 'turning point'

A pick-up in the global economy has boosted Britain's manufacturers

Britain's manufacturing slump has reached a "turning point", with the troubled sector now rapidly expanding, according to the CBI.

In its latest survey of the sector, the CBI said optimism in January hit its highest level since April 2002.

The survey also showed that orders were growing at their strongest pace for seven years.

Economists believe the news will further reinforce the prospect of a rise in UK interest rates next month.

The CBI's latest quarterly industrial trends survey showed that manufacturing output increased for the first time in three years and at the strongest rate in eight.

Global boost

Ian McCafferty, chief economic adviser at the CBI, said: "This is a significant turning point. Manufacturing is joining the party we have seen in other parts of the economy."

The sharp improvement in output and order books was largely due to the pick-up in the global economy, strong domestic growth in the fourth quarter of 2003 and the depreciation of the pound against the euro, the CBI said.

There must be an outside chance the MPC will vote for a 50 basis points hike Adam Cole, Credit Agricole Indosuez

With the Bank of England's rate-setting Monetary Policy Committee (MPC) due to meet next week, many economists believe a much-anticipated increase in UK base rates will finally come into place.

Expectations of an increase were heightened last week after official figures showed that the economy had performed strongly at the end of last year, while retail sales jumped by nearly 1% in December.

Adam Cole, an economist at Credit Agricole Indosuez in London, said: "There must be an outside chance the MPC will vote for a 50 basis points hike."

The Bank of England last raised interest rates in November 2003, increasing them by a quarter percentage point to 3.75%.

Earlier in January, official figures from the Office for National Statistics showed that UK manufacturing fell 0.7% in November last year.