Pound up as factory output grew at fastest rate for three years in 2017

The manufacturing sector, which contributes 10 per cent of GDP, expanded 1.3 per cent in the fourth quarter, matching the previous three months. 

It is on a run of eight straight months of growth – its longest expansion in two decades – and its 2.7 per cent rise in output last year beats the overall economy’s annual growth of 1.8 per cent.

Factory growth has defied a car production fall – 1.6 per cent lower in the fourth quarter – with metal products and pharmaceuticals particularly strong.

Manufacturing supported a 0.6 per cent rise in output in the production sector in the last three months of 2017, despite a 3.9 per cent drop in mining and quarrying. 

Annual production growth of 2 per cent is the strongest since 2010. 

The powerhouse services also kicked on in the fourth quarter, according to the Office for National Statistics, expanding 0.6 per cent compared with 0.4 per cent over the previous three months. 

Professional services spanning law, accountancy and consultancy have seen work levels pick up, while business was flat at hotels and restaurants. 

Despite the construction sector contracting for a third consecutive quarter, services and manufacturing boosted economic growth by a forecast-beating 0.5 per cent in the fourth quarter. 

Sterling strengthened by a further 0.2 per cent against the dollar to $1.417 and is up over 5 per cent against the US currency this year. 

EEF’s Ms Lee Hopley said: “Manufacturing put in a particularly strong showing, reflecting the role a strengthening global economy is playing in the improved outlook for externally facing sectors. 

“The performance of manufacturing in 2017 was the best for three years, although a number of key sectors such as mechanical equipment and chemicals will need to sustain this performance for output to return to pre-recession peaks.” 

Investec economist Victoria Clarke said: “Faced with a cash squeeze at home, it at least appears that export-focused manufacturers benefited from the weaker pound following the June 2016 EU referendum.”