Slump In Sterling Boosts UK Export Orders

UK export orders reached a two-year high in August after goods became cheaper for overseas buyers thanks to the slump in the value of the pound, new figures show.

The survey from the CBI will add to optimism about the resilience of the economy after the vote to leave the European Union, following better than expected retail sales and jobs figures last week.

A poll of 505 firms by the CBI found 21% said total export orders were above normal compared to 27% saying they were below normal - giving a balance of -6%.

The export reading was the best since August 2014 for the beleaguered manufacturing sector which has been struggling to recover since the recession, despite the upturn in the wider economy.

It comes after the pound slumped to 31-year lows in the wake of the Brexit vote on 23 June.

Manufacturing tends to gain from falls in the pound because it makes UK goods cheaper for foreign buyers - though some firms will also face higher costs to import raw materials.

Figures showed overall output growth from Britain's factories dipping slightly in August, though still doing better than expected.

Anna Leach, CBI head of economic analysis and surveys, said: "It's good to see manufacturing output growth coming in stronger than expected, and some signs that the fall in sterling is helping to bolster export orders.

"But the pound's weakness is a double-edged sword, as it benefits exporters but also pushes up costs and prices.

"The most significant effects of the vote to leave the EU will flow over the medium to long-term.

"Therefore firms need to see ambitious decisions in the Autumn Statement that will secure the UK's economic future as changes to trade, regulation and access to skills loom on the horizon."

Paul Hollingsworth, UK economist at Capital Economics, said the survey was another reason to be "tentatively optimistic about the extent to which the economy has taken a hit from the referendum outcome".

He said: "In part, the weaker pound seems to be already starting to help cushion the blow for manufacturers.

"While it is still early days, the latest survey is another reason to think that the economy should avoid a deep recession."