UK manufacturing
Exports are not contributing enough to the UK manufacturing sector's recovery Reuters

Britain's manufacturing sector recovery is largely driven by demand at home rather than abroad as exports continue to disappoint.

A report from the manufacturers organisation EEF upgraded its growth forecast for the sector in 2014 to a 3.6% rise in output in 2014, up from 2.7% estimated previously. As a result, more manufacturers are reporting intentions to hire staff and invest.

But firms reported fewer export orders, instead relying on the accelerating domestic economic recovery – which the Bank of England predicts will see 3% GDP growth over the year – for sales.

"A combination of limited growth in Europe, a bad start to the year in the US and a strengthening exchange rate has raised the hurdle for companies seeking growth from overseas markets," said EEF in its second quarter manufacturing outlook.

"There are some good reasons to pencil in a turnaround in export fortunes in the later part of this year, and if world trade growth picks up as forecast this should help with the long-awaited rebalancing of the UK economy."

Chancellor George Osborne is targeting a £1tn total value of UK exports by the end of the decade, a goal he is widely expected to miss because of ongoing economic and financial difficulties in some of the country's key markets.

He wants to lift UK trade as a means of shifting the economy's reliance away from the vast service sector, recovering housing market and household spending.

In April 2014 the UK trade deficit – the difference between imports and exports – more than doubled across the month to £2.5bn.