Factory growth picks up after slow start to year
The Bank of England is weighing up a decision on whether to raise interest rates.
Manufacturing growth has picked up to its strongest rate for a year, but firms have signalled their investment intentions remain subdued.
A survey of 357 manufacturers from the Confederation of British Industry (CBI) has found new orders continued to rise in the three months to July, and the survey’s measure of output hit a high of +27, up from +13 in April.
However, investment plans fell back, with companies intending to cut down on spending on buildings and land.
Skills shortages are increasing and making it hard for businesses to invest in capital projects, particularly with on-going uncertainty around the direction of Brexit talks Rain Newton-Smith, CBI chief economist
Companies also said they planned to reduce investment on new products and processes, and spending on training is expected to fall at the fastest rate since 2009.
Rain Newton-Smith, CBI chief economist, said: “The pick-up in output growth is good news and with new orders still running at a healthy rate, the near-term outlook for manufacturers remains reasonably bright.
“Yet manufacturers are still in wait-and-see mode when it comes to their investment plans.
“Skills shortages are increasing and making it hard for businesses to invest in capital projects, particularly with on-going uncertainty around the direction of Brexit talks.”
The data comes as the Bank of England decides on whether to raise interest rates.
The Bank of England previously said it was waiting to see signs of a recovery in the UK economy after growth stalled at the beginning of the year.
Howard Archer, chief economist at EY Item Club, said Bank of England policymakers would be “relatively happy” with the data from the CBI.
“Conditions still look far from easy at home for manufacturers – notably, still limited (albeit gradually improving) consumer purchasing power as well as business caution over investment amid significant uncertainties, including over Brexit,” he said.