Smaller UK manufacturers' investment intentions rise in Jan -survey

LONDON Mon Feb 3, 2014 7:01pm EST

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LONDON Feb 4 (Reuters) - Intentions by small and medium-sized manufacturing firms to invest increased in the three months to January, an industry survey showed on Tuesday, raising hopes of a revival in the lagging manufacturing sector.

Plans to spend on buildings over the next year reached +14, the strongest reading since the data series began in October 1988, the Confederation of British Industry's survey of small and medium-sized firms showed. Intentions to invest in plant and machinery also reached +14, the strongest since July 1995.

Small firms have generally not benefited from the Funding for Lending Scheme introduced in 2012 although there have been signs the banks are growing more willing to provide credit as the recovery gathers speed.

"As the recovery takes hold, the investment cycle is starting to turn," CBI economist Stephen Gifford said.

Growth in new factory orders slowed slightly in January and the prospects for the next three months also eased.

"Orders and output continued to grow at a healthy pace, although not as fast as predicted. However, firms remain optimistic about prospects, with growth in orders and production expected to accelerate," Gifford added.

The total new order book balance in the survey was +14 in the three months to January, down from +17 in October, as domestic order growth slowed and export orders fell.

The survey's measure of the volume of total new orders for the next three months was +19, down from +26.

Britain's economy staged an unexpectedly strong recovery last year, but there are concerns the rebound is too unbalanced to be sustainable, with too great a reliance on household consumption and insufficient exports and business investment.

British manufacturing has been recovering from the financial crisis but remains below its 2008 peak. Bank of England Governor Mark Carney has said that a sustained recovery requires a revival in business investment.

Optimism regarding the business situation remained solid at +21 in the three months to January, but was down from +35 in October which had been the biggest rise in optimism on record.

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