UK manufacturers reported their strongest order books in almost two years in August as export demand rebounded, providing tentative signs that conditions in the struggling industrial sector are beginning to improve.

The Confederation of British Industry's latest Industrial Trends Survey found total order books remained below normal but improved sharply to a balance of minus 25 per cent, from minus 45 per cent in July. That was the strongest reading since November 2024, although it remained below the long-term average of minus 14 per cent.

Export orders recorded a particularly strong recovery. The balance climbed from minus 33 per cent in July to zero in August, indicating manufacturers considered overseas orders to be at normal levels for the first time since June 2022.

The improvement was driven by stronger demand among chemicals, electrical goods and other manufacturing businesses.

However, the survey of 273 manufacturers suggested the wider sector remained under pressure. Output volumes declined in the three months to August, with the balance improving to minus 17 per cent from minus 24 per cent in July.

Production fell across 12 of the 17 manufacturing subsectors monitored by the CBI, led by metal products, food, drink and tobacco, chemicals and electronic engineering.

Manufacturers expect output to decline again during the three months to November, although at a considerably slower rate. The expectations balance improved to minus 7 per cent, its least pessimistic level since the outbreak of the Iran war.

Inflationary pressures also persisted. Expectations for selling price increases rose to a balance of 22 per cent in August from 11 per cent in July, significantly above the long-term average of 8 per cent.

Cameron Martin, senior economist at the CBI, said stronger international demand was providing "some welcome relief for manufacturers", but cautioned against interpreting the improvement as the start of a sustained recovery.

"It is too soon to know whether this marks the beginning of a sustained shift in conditions, particularly given ongoing cost pressures reported by manufacturers," he said.

Martin urged the government to avoid increasing business costs in the Autumn Budget and called for measures to improve industrial competitiveness, including the British Industrial Competitiveness Scheme and reductions in policy-driven energy costs.