Smaller manufacturers are hoping the weak pound will boost orders from overseas, leading to optimism about exports hitting a 15-year high.
Small and medium-sized firms reported a stabilising in export orders during the three months to January, following seven consecutive quarters of declines, according to business group the CBI.
Overall, 27 per cent of firms said export orders rose during the period, compared with 25 per cent who said they fell, giving a balance of 2 per cent, the strongest figure since January 2008.
Export orders are expected to grow more strongly going forward, with a balance of 8 per cent of firms expecting a rise during the coming quarter, while 15 per cent are positive about prospects for the year ahead, a level last seen in October 1995.
Manufacturing production also steadied during the past three months, although it is expected to fall during the next quarter as overall demand remains weak.
Domestic orders continued to decline but they did so at the slowest rate since April 2008.
Overall 23 per cent of firms reported a rise in domestic orders during the past three months, but this was more than offset by the 33 per cent of firms that saw a slump, and companies expect domestic orders to fall again during the coming quarter.
Russel Griggs, chairman of the CBI’s SME Council, said: “Smaller manufacturers have been pinning their hopes on the relative weakness of sterling to boost overseas orders and offset weak demand at home. It is therefore encouraging that exports are now stabilising.
“However, with the economy only just edging out of recession, conditions will still feel pretty challenging for smaller firms.
“Domestic orders are likely to remain depressed, and firms are expecting output to fall in the next three months.”
Around 10 per cent of smaller manufacturers are also reporting that problems accessing credit are likely to limit their output or export orders during the next quarter, while a balance of 8 per cent are expecting to reduce their headcount.