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London - Brexit is giving a big boost to exporters as the weak pound lifts sales to the strongest since the 1990s.
Order growth for manufacturers was the highest in over two decades in the first quarter, the Confederation of British Industry said in a report on Monday. The news isn’t entirely positive for factories, though, as prices continued to rise and investment intentions for the year ahead softened.
“UK manufacturers are enjoying strong growth in demand from customers in the UK and overseas” and “exports have surged,” said Rain Newton-Smith, chief economist at the CBI.
“Even so, the combination of the weak pound and recovering commodity prices means that cost pressures continue to build.”
The CBI’s measure of the outlook for prices for the next three months rose to the highest since 2011. Unit costs also climbed to the highest in about six years.
The pound’s fall since the UK’s decision to leave the European Union has made exports more competitive, and boosted inflation above the Bank of England’s (BoE) 2% target. Prime Minister Theresa May has indicated she will take the UK out of the single market, and economists expect some reduction in trade with the bloc.
BOE Deputy Governor Ben Broadbent called the economy’s circumstances - a low pound and continued access to the EU single market - a “sweet spot” for exporters. Michael Saunders, another BOE policy maker, said last week that while the long-term effects of Brexit may be detrimental, he sees a rise in exports and stronger-than forecast growth over the next couple of years.
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