Economy

UK manufacturers’ hopes for rebound strongest since 1973

Revival in investment and hiring plans seen in quarterly survey

Prime Minister Boris Johnson has begun easing lockdown measures in the UK. Photograph: UK Parliament/Jessica Taylor/PA Wire

Thu Apr 22 2021 - 11:57

British manufacturers’ expectations of an economic rebound rose to their highest in 48 years this month as the country began to recover from the slump caused by the Covid pandemic, the Confederation of British Industry said on Thursday.

The CBI said its quarterly survey of manufacturers also pointed to a revival of investment and hiring plans and continued concerns about higher costs.

“Phased reopening has lifted the mood among firms, notably driving orders, employment, and investment plans,” CBI chief economist Rain Newton-Smith said.

“However, rising costs are an increasing concern for many businesses, and seem to be putting upward pressure on prices as firms try to protect their margins,” she added.

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The CBI said its quarterly business optimism gauge, based on a survey of 288 manufacturers between March 24th and April 14th, jumped to +38, its highest since April 1973, from January’s reading of -22.

Investment intentions for plant and machinery were the strongest since July 1997, following the announcement of a temporary tax break designed to bring forward investment in March’s budget.

However, the CBI’s separate monthly survey of manufacturers was somewhat less upbeat, with the monthly manufacturing orders expectation balance falling to -8 from +5, against average expectations in a Reuters poll for an increase to +2.

The quarterly survey also showed the biggest increase in costs for manufacturers since April 2011.

Britain's economy shrank by almost 10 per cent last year, its biggest annual slump in more than 300 years, and the International Monetary Fund expects it to grow by just over 5 per cent this year and next.

Factories were not directly affected by tougher lockdown rules introduced at the start of the year to control the spread of Covid, but many of their customers were.

Restrictions have started to ease following the roll-out of Covid vaccines, with non-essential shops reopening on April 12th and pubs and restaurants resuming outdoor service. – Reuters

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