Factory figures the best for nearly two decades

The new figures will further add to hopes that the UK is on track to achieve sustainable recovery and grow its once powerful industrial base, which remains well behind its pre-recession peak.

Activity rose to a reading of 57.2, its best level since February 2011, in the latest Markit/CIPS purchasing managers’ index (PMI). The 50 level separates growth from contraction.

Output rose at the fastest pace since July 1994 while new orders increased at their strongest pace since August 1994.

Rob Dobson, senior economist at survey compilers Markit, said: “The UK’s factories are booming again.”

He said rising demand from domestic customers was being accompanied by a return to growth of the eurozone, Britain’s largest trading partner.

Jobs increased for the fourth month running though this was described as muted as companies tried to squeeze more from existing resources. Manufacturers also faced having to absorb the soaring costs of oil and raw materials.

The improvement was the latest buoyant update on Britain’s economic progress, after revised gross domestic product figures showed it grew by a better-than-expected 0.7 per cent in the second quarter.

Improvement in the manufacturing sector is especially welcome amid concerns that the economy needs to be re-balanced towards traditional industry.

But the accelerating growth has added to speculation that interest rates may have to be raised from their historic low of 0.5 per cent sooner than 2016 – the figure suggested by the Bank of England’s forward guidance policy.

The new figures showed marked expansion in output across the consumer, intermediate and investment goods sectors.

The domestic market was the main source of new contracts though there was a solid increase in overseas demand.

Companies said new product volumes, promotions and improved confidence had helped boost order volumes.

Stronger demand was reported from the US, China, mainland Europe, India, Scandinavia, Brazil and Ireland.

However, input prices rose at their fastest rate for two years, with increases in the costs of commodities, feedstock, oil, paper, polymers and timber.