British factories had their strongest month in more than two years in August as demand at home offset a fall in exports, according to a survey published on Monday that added to signs of momentum in the economy.

The S&P Global UK Manufacturing Purchasing Managers' Index rose to 52.5 from 52.1 in July, its highest reading since June 2022 and unchanged from a preliminary flash reading for August.

"The upturn is broad-based across manufacturing, with the investment goods sector the stand-out performer," Rob Dobson, Director at S&P Global Market Intelligence, said.

Demand for investment goods is often considered an expression of confidence in the economy by businesses.

As well as output and new orders, employment continued to grow.

Britain's economy has been stronger this year than expected by forecasters, including at the Bank of England, representing a favourable backdrop for the new government of Prime Minister Keir Starmer who is seeking to speed up growth.

"The upturn continues to be driven by the domestic market," Dobson said, noting new business from overseas had fallen continuously since early 2022 due to weakness in Europe, China's slowdown, high shipping costs and global uncertainty.

Supply constraints and higher shipping costs were also driving up input prices which rose for an eighth month in a row, albeit more slowly than in July and June.

The BoE - which says it cannot yet declare victory over inflation, especially in Britain's services sector - is expected to keep interest rates on hold this month before cutting them for only the second time since 2020 in November.

A PMI for the dominant services sector is due on Wednesday. The preliminary August reading of the services index hit its highest level since April at 53.3, up from 52.5 in July.

(Reporting by William Schomberg; Editing by Hugh Lawson)