26/08/2010
An index of British factory orders hit its highest level in two years, according to the CBI's industrial trends survey.
As reported by Reuters, the Confederation of British Industry's survey showed that a rebound in demand helped factory orders grow during, up from -16 in July to -14 in August. The export order book balance massively rebounded to -1 from July's -12. Reuters explains that the survey's order book balances are almost always in negative figures, even if other measures show growing orders.
"Prospects for the manufacturing sector remain very positive," said Lai Wah Co, the CBI's head of economic analysis. "Demand is steadily improving, helped by the revival of export orders after some weakness last month, and manufacturers expect slightly strong production growth in the three months ahead. However, inflationary pressures within the sector have not fully faded, and firms are predicting a faster rise in output prices over the next quarter."
As reported by Fresh Business Thinking, 21% of manufacturers said total orders were above normal, and a quarter said their export order books had also grown to above normal levels. Manufacturers also reported that they expect production to grow over the next three months.
It could be months before manufacturers see the cash from the growth in orders, especially as some clients take up to three months to pay invoices in the public sector. This can have a dangerous impact on the cashflow of the business. However, manufacturers can get the cash from an invoice not yet paid from, and hand over the responsibility of collecting the debt to factoring companies. These companies specialise in factoring invoices, which is essentially cashing an invoice much in the same way a consumer would cash a cheque.
Laura Nineham