The UK manufacturing sector bounced back strongly in July thanks to the strongest surge in export orders for more than seven years.
Monthly purchasing managers’ index (PMI) data from Markit/CIPS UK Manufacturung showed higher than expected growth in Britain’s factories with a reading of 55.1 last month, up from 54.2 in June.
A reading above 50 indicates growth.
The pound jumped to a fresh 10-month high against the US dollar after the report, which said foreign demand for British-made goods rose at the fastest pace since April 2010.
Firms reported an increase in orders from clients in North America, Europe, the Asia-Pacific region and the Middle East.
However, the improvement in the pace of increase was still among the slowest registered during the past year.
Sterling lifted 0.2% to 1.32 US dollars and 0.4% to 1.12 euros after the latest figures were published.
The beleaguered manufacturing sector is still struggling to catch up following the recession nine years ago despite efforts to drive growth.
But the latest figures offered a glimmer of hope, also revealing an increase in employment for the 12th consecutive month.
Manufacturing is seen as a potential winner from the EU referendum result as the subsequent sharp fall in the value of the pound makes UK goods cheaper and more attractive for overseas buyers.
However the PMI data also showed the downside of the currency plunge, with firms linking higher costs to rising prices on imported raw materials and the exchange rate.
Duncan Brock, of the Chartered Institute of Procurement and Supply which compiles the survey with researchers Markit, said the sector “remained on terra firma… with a sustained rise in new orders, overall activity, new jobs and with strong optimism to boot”.
Rob Dobson, director of IHS Markit, added that the sector had kicked off the third quarter of the financial year on a “solid footing”.
But economists warned the figures would not be enough to spur on wider UK growth.
The PMI reading is the latest in a series of private survey results to give a much healthier picture for manufacturing output and export orders.
Figures released by the the Office for National Statistics last week recorded a 0.5% drop in manufacturing output in the three months to June, largely blamed on a fall in car production as factories readied themselves for new models.
Samuel Tombs at Pantheon Macroeconomics said: “Markit’s survey remains consistent with only modest growth in manufacturing output that will provide insufficient compensation for the slowdown in the consumer sectors of the economy.”
James Smith, an economist at ING, added: “Wider economic data, from the weak second-quarter growth reading to the latest dip in consumer confidence, suggests that the economy is losing speed.
“For that reason, we think the Bank of England is unlikely to hike rates this year.”
The Bank will make its latest interest rate decision on Thursday.