UK manufacturing confidence hits 20-month high

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Manufacturing optimism has reached a 20-month high, according to accountant BDO LLP.

The latest Business Trends Report shows continuing signs of encouraging economic prospects over the coming six months, despite uncertainty around Brexit and the US Presidential Election.

BDO’s Optimism Index, which indicates how firms expect their order books to develop in the coming six months, continues to rise and now sits at 103.7 – from 102.2 in December – and above its long term trend.

Meanwhile BDO’s Output Index, which indicates how businesses expect their order books to develop in the next three months, has increased for the third consecutive months to 97.5 – up from 97.4.

BDO said that it attributes the positive performance of UK businesses to an overall improvement in the global economy, a decrease in the value of sterling and better -performing key export markets.

However, the Inflation Index also increased from 103.8 to 104.5. It warned that while currency depreciation makes exports more price competitive, input prices have risen sharply and squeezed margins.

Peter Hemington, partner at BDO LLP, said: “British businesses are surprisingly confident about the short term, encouraged by the opportunities our cheaper currency and a better-performing global economy have created. These have provided a much-needed short-term boost for our economy, particularly our manufacturers.

“However, government still has much to do in these uncertain times if the UK is going to stay on the right economic track."