Factory orders at three-year high

The value of sterling has still to have an effect on export orders

Britain's manufacturing sector is firmly on the road to recovery, with orders at their highest level for three years, according to business leaders.

In its latest trends survey, the CBI said export orders have grown to their best levels in over seven years, shrugging off the strength of sterling.

Demand is improving "domestically and globally", the business group said.

However, economists believe these bullish figures will reinforce the case for another rise in UK interest rates.

Recovery gathering pace

In the CBI's industrial trends survey, which questioned 803 manufacturers, it revealed that 21% of firms thought total orders were above normal levels, while 29% thought they were below.

The balance of minus 8%, compared with minus 15% in the previous survey, is the strongest result since December 2000.

Companies also reported lean stock levels, which suggests that factories will be manufacturing goods at a speedier rate in the coming months.

On the downside, the CBI noted domestic prices were threatened by an increase in cheaper goods from abroad.

CBI chief economic adviser Ian McCafferty said the figures showed the manufacturing recovery was gathering pace.

He continued: "The value of sterling is yet to have an impact on export orders, though manufacturers will be concerned if the pound strengthens further.

"Competition from cheaper imports has, however, renewed the downward pressure of domestic output prices."