MANUFACTURERS have stopped shedding jobs and have seen the biggest upturn in orders for more than seven years, driven by increasing exports, a report has revealed.

Output and orders in the second quarter of the year grew at the fastest pace since 1996, according to research for the Engineering Employers Federation (EEF).

A survey of 1,500 companies found they were planning to increase investment for the first time in six years.

EEF regional director Alan Hall said: "These figures suggest a strengthening of the upturn recorded in the first quarter. Manufacturers are expecting to expand further in the second half of this year, though the rising price of oil and commodities will make it harder to rebuild margins and could also eat into growth."

All sectors of manufacturing reported growth in the past three months, with more buoyant conditions found across all regions of the UK.

Electronics continued to drive growth in the South and Scotland, while the North-West and North-East benefited from the upturn in mechanical equipment.

The Midlands continued to improve, despite the weaker performance of motor vehicles. There were some signs of rising prices, mainly due to companies passing on the rising cost of steel.

Manufacturing was forecast to grow by 0.9 per cent this year and 2.7 per cent next year, and engineering by 1.8 per cent and 4.4 per cent, but the EEF said growth could be stronger.

Stephen Radley, EEF chief economist, said: "It is now essential that companies take advantage of these vastly better conditions to make up the cutbacks in investment of the last few years to improve their performance."