UK manufacturers are their most upbeat since January 2015, according to the latest Industrial Trends survey from the CBI.
The survey of 461 manufacturer also reported that domestic orders have grown strongly over the last quarter, but export growth has dipped back.
The survey shows that the pound’s tumble is pushing up import prices, but it’s also making UK firms more competitive in the global market.
Concerns persist over access to skilled labour, however, with almost a quarter of respondents – the highest since July 1989 – observing that skilled labour availability could limit output over the next few months.
Rain Newton-Smith, CBI chief economist, said: “UK manufacturers are firing on all cylinders right now with domestic orders up and optimism rising at the fastest pace in two years.
“The weaker Pound is driving export optimism for the year ahead, but is having a detrimental impact on costs for firms and ultimately for consumers.
“The new Industrial Strategy can support our manufacturing base by offering a shared long-term vision for the key sectors and regions of the economy and evidence-based plans for government and business collaboration. The CBI and its members across the country stand ready to support the Government in achieving this.”