The closely watched Markit/CIPS UK Manufacturing purchasing managers’ index hit 53.3 in August, up from 48.2 in July and above economists’ expectations of 49.
A reading above 50 indicates growth.
The pound leapt 0.71 per cent against the dollar on the news, breaking through the 1.32 barrier.
Jeremy Cook, chief economist at the international payments company, World First, said: “After Brexit we have the Brebound and the currency effect. Companies in the manufacturing sector seem to be getting back to business and we are seeing order flows pick up from across the world as the devalued pound boosts the competitiveness of UK exported goods.”
Mr Cook added: “We maintain our belief that we still really have very little idea about what is happening under the hood of the UK economy, and the picture will only become truly clear as slower sides of the economy – inflation, jobs and investment – start to react. For now the pound is helping a sector that spent a lot of the global financial crisis underperforming.”
The manufacturing sector was in the doldrums following Britain’s vote to leave the European Union, with Brexit uncertainty putting the brakes on growth and forcing the industry to a 41-month low in July.
But it rallied in August, matching the highest month-on-month increase since the survey began nearly 25 years ago.
The resurgence was driven by a rebound in manufacturing output and incoming orders, with new business seeing an upturn in the UK and abroad.
The slump in sterling to 31-year lows following the EU referendum result made British products cheaper, boosting export orders to a 26-month high, with increased demand from the US, Europe, China, South East Asia, the Middle East and Norway.
However, the fall in the value of the pound proved a double-edged sword, as input price inflation rocketed to a five-year high, with 44 per cent of companies reporting a jump in purchasing costs.
There was also a brighter picture for manufacturing recruitment as employment grew for the first time this year, albeit at a low level.
The boost to jobs came from small and medium-sized manufacturers, while bigger firms trimmed their workforces.
David Noble, group chief executive at the Chartered Institute of Procurement & Supply, said the report showed “the Brexit brakes are off”.
“With exchange rates supporting more orders overseas, the counter-effect of a lower pound meant that purchasing costs were higher, which was reported by 44% of procurement managers.
“An increase in stock building could signal more positive hope for the coming months,” he added. “But it remains to be seen whether this expansion of activity is merely filling the post-Brexit void or whether this strong performance will continue.”