Engineers' exports overtake UK sales

Economics: Weak pound helps exporters but threatens to force Chancellor to raise interest rates

For the first time in history, Britain's engineering industry exports more than it sells at home, writes Diane Coyle. Export sales will continue to grow faster than home sales, according to the Engineering Employers' Federation.

The EEF estimates that exports have overtaken net home sales in importance within the past 18 months. Since 1992, exports have risen 27 per cent in real terms, while UK demand is up only 13 per cent. Since part of home demand is met by imports anyway, the British industry's sales at home have probably risen by only 6 per cent in three years.

The EEF reckons exports will amount to pounds 71bn this year, compared to net sales in the UK to customers outside the engineering industry will be pounds 64bn. It forecasts strong export growth for the year ahead.

Ian Thompson, head of economics, said recovery in western Europe, which accounts for 60 per cent of Britain's engineering exports, was still in its early stages. He also expects a good performance on the domestic front thanks to the fact that investment in plant and equipment is picking up. Mr Thompson said: ''This has already happened in the engineering industry itself, and it will spread to other industries.''

The EEF challenges official figures showing a dip in engineering output in the first few months of this year. It said its own surveys had shown growth accelerating throughout last year and the first quarter of this year - like other surveys which contradict the official slowdown.

Growth in engineering output was exceptionally rapid last year, reflecting big increases in electronics, computers and cars. Electronics and computers will remain in the forefront of output growth, although employment will remain flat. But sales at the end of this year will still be at the same level as in 1990.