UK manufacturing recovery has slowed, CBI says

The speed of the British manufacturing recovery has slowed and companies are more gloomy about their competitiveness in the eurozone.

Output growth has fallen to the lowest level since January 2013, according to a quarterly survey by the CBI employers' group. Domestic orders remain solid but optimism about the outlook for exports in the year ahead dropped to a two-year low.

Investment intentions were also down sharply, and the balance of companies believing their competitiveness in Europe is improving dropped to the lowest level in 15 years.

But it was not all bad news in the survey, with companies reporting they expect new orders to pick up over the next three months and volumes to rise again.

Katja Hall, deputy director-general of the CBI, said companies expected to continue to expand but "exports keep dragging at the heels of growth".

"Firms are finding the recent rise in the pound against the euro challenging, making them less competitive in Europe, while the unravelling situation in Greece is creating uncertainty."

Paul Hollingsworth, UK economist at consultancy Capital Economics, one of the more optimistic forecasters of overall growth in the UK this year, did not believe the recent fragility indicated the start of a period of prolonged weakness for the sector.

Pointing out that many of the balances in the survey were still above long-term averages, he said that with "domestic demand set to remain strong this year, we expect the manufacturing recovery to gather further pace later this year".

The slightly softer survey comes a day ahead of the first official estimate of growth for the first three months of the year.

While most economists expect a slight slowdown from the 0.6 per cent quarter-on-quarter expansion at the end of last year, the range of forecasts in the City is unusually wide.

A Reuters poll found that economists are predicting everything from a 0.3 to 0.9 per cent increase - which equates to either a notable slowdown - or pick up.

The difference in estimates is mainly accounted for by whether the economists are placing more weight on survey data - which have been strong - or official data, which have largely been weaker than last quarter.

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