A CBI (www.cbi.org.uk) survey of 300 manufacturing firms reported that business optimism improved significantly in the quarter to January, at the fastest pace since April 2014; and while “export sentiment” continued to fall, it was “noticeably less gloomy” than in the previous quarter.

Investment intentions also improved after “particularly glum expectations in October”, with a record proportion of firms expecting to authorise capital expenditure in order to expand capacity.

However, a record proportion of manufacturers were concerned that a shortage of labour could constrain their investment spending over the year ahead.

The survey said: “The improvement in manufacturers’ sentiment belied poor activity over the quarter. Output volumes in the three months to January fell at a similarly quick pace to December, largely reflecting a sharp fall in motor vehicle output. This marked the eighth month in a row of flat or falling output volumes.

“Total new orders fell at the quickest rate since the financial crisis, reflected by a similarly fast fall in domestic orders.

“However, orders and output are expected to recover slightly in the quarter ahead; and while the head-count fell in the quarter to January at their fastest pace since the financial crisis, firms expect the rate of decline to fall next quarter.”

Tom Crotty, group director at the chemicals company INEOS and chairman of the CBI Manufacturing Council (pictured), said: “The boost to optimism in the manufacturing sector is very encouraging, given the difficult environment that firms have faced in recent months.

"However, it is clear that the sector is not yet out of the woods in terms of performance, which means that this optimism could prove to be short-lived, unless the Government uses its newfound strength to help address underlying issues holding back manufacturers.

“Manufacturers are ready to work with the Government to make real progress on key domestic challenges such as increasing productivity, addressing skills shortages, improving sustainability and tackling climate change.”