Food and drink prices to soar as UK manufacturers hit by weak pound

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Britain's factories are set to hike their prices at the fastest rate in nearly three years after the Brexit-hit pound sent costs soaring, according to a report.

The CBI survey showed food and drink prices are expected to bear the brunt of the price rises, adding to fears over surging UK inflation.

But there was a dose of good news from the manufacturing sector as the monthly survey found orders have recovered to levels seen before the Brexit vote.

Manufacturers are also the most confident about the outlook in nearly two years.

Rain Newton-Smith, chief economist at the CBI, said: "It's good to see manufacturers' overall order books at healthy levels, and the outlook for output growth remaining robust as we head into Christmas.

"But the weak pound is beginning to make its mark, and prices are expected to rise, especially in the food and drink sector. On the flip side though, export orders remain above average."

The survey of 430 manufacturers showed its orders balance improved to minus 3 in November - its highest level since June and a marked improvement on the minus 17 balance in October.

Average selling prices are expected to rise sharply over the next three months, with a balance of +19%, and at their fastest pace since January 2014.

While the sharp falls in the value of the pound since the UK's decision to quit the EU has started to send input costs surging, it has yet to boost exports despite making British goods cheaper for overseas buyers.

The report showed a balance of minus 11% for export order books, which is worse than the minus 6% seen in October, although it remains above average.

But manufacturers are cheery over prospects for the sector, with the survey showing expectations for output in the next three months jumping to a balance of +24 from +13 in October - the highest since February 2015.

Howard Archer, economist at IHS Global Insight, said expectations for price rises were "particularly bad news for consumers".

"This reinforces belief that consumer price inflation is headed markedly higher over the coming months," he added.