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Civil engineering growth offsets housebuilding slowdown

Civil engineering growth is offsetting the housebuilding slowdown, with manufacturing continuing to grow during February, according to the Chartered Institute of Procurement and Supply (CIPS).

The Markit/CIPS Purchasing Managers Index, which contains up-to-the-minute information about industry conditions in manufacturing in the UK, showed overall activity grew for the seventh consecutive month in February, underpinned mainly by a strong rise in new export orders.

The news is music to the ears of cheerleaders for Brexit, such as millionaire businessman John Mills, who is chairman of London-based consumer products company JML - though some have warned signs of a slowdown could mean there is a bumpy road ahead for manufacturers.

Mills, who served as one of the leading lights of the Vote Leave campaign in the run up to the referendum, said the weaker pound should be cause for celebration among those working in the sector.

“Manufactured goods are very price sensitive and if you have a lower pound, it makes them more competitive,” the Labour Party donor told E&T Magazine.

I think light industry is obviously doing a bit better because exports are up. A lower pound must help. I don’t know how anyone can believe it doesn’t help. It all seems pretty straightforward to me: if you lower prices, it’s going to be easier to get orders than if you charge higher ones.”

Some manufacturers have warned that Brexit is already impacting negatively on inward investment.

Dame Judith Hackitt, who chairs influential manufacturers organisation the EEF, last month criticised Prime Minister Theresa May for suggesting Britain would be prepared to crash out of the EU and rely on World Trade Organisation rules if no acceptable exit deal is reached with the remaining 27 member states.

The UK would “spend the next thirty years repenting” if it quit the bloc too soon, she warned.

The EEF has previously said that six in 10 of its member companies were in favour of the UK remaining in the EU, while just five per cent supported leaving.

Mills said that Britain’s trade deficit with the EU could be reversed. He added, “I don’t know why she [Dame Judith] doesn’t seem to see this.

“The reason why we’ve got this huge trade deficit is we’ve got so little to sell to the rest of the world. That’s the problem we’ve got. Manufacturing is 10 per cent of GDP. In Germany it’s 23 per cent, I think. In Switzerland, it’s 19 per cent.”

Pro-Brexit lobby group Change Britain claims the EU’s own figures show leaving its customs union and striking fresh trade deals with just eight economic partners could result in the creation of up to 400,000 new UK jobs.

Concerns remain over the impact on the car industry, however, with both Nissan and Ford reported to have expressed doubts over the future of their British manufacturing facilities.

UK survey data shows new export orders rose for the ninth successive month in February, with companies attributing this to improved sales to clients in mainland Europe, the USA, Asia, Australia, Canada and Ireland.

Civil engineering replaced housebuilding as the main growth driver, although there was a general slowdown in manufacturing growth.

Tim Moore, a senior economist at IHS Markit, which carried out the research, said: Survey respondents mainly cited an underlying slowdown in sales growth, with the latest rise in new work the weakest for four months.

In some cases, construction companies reported that sharply rising input prices had a disruptive impact on contract negotiations.

He explained that suppliers have made efforts to pass on rising energy costs, with global commodity prices amplifying the effects of the weak sterling exchange rate.

Input costs have climbed in part due to the post-Brexit collapse of the pound, which has made imports more expensive for domestic firms.

Earlier this week MPs were warned about the potential consequences to the UK's nuclear power stations of triggering Article 50, which officially starts the process of Britain's divorce from the EU.

Rupert Cowen, a lawyer specialising in energy, said in a worst-case scenario the power stations could be forced to shut down because of a lack of fuel as a result of leaving the Euratom organisation.

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