UK factory orders weaker than expected in July

British manufacturing orders have fallen at their fastest rate since January 1992 this month, a survey showed on Wednesday, disappointing hopes for a speedy recovery in the sector.

The Confederation of British Industry's industrial trends survey showed the order book balance fell to -59 in July from -51 in June, below analysts' expectations of a reading of -45.

"The survey heightens suspicion that sustainable growth in the sector could remain elusive for some considerable time to come," said Howard Archer, an economist at IHS Global Insight.

The export orders balance improved slightly in July, up to -45 from -52 in June, but still indicated sharp declines.

The CBI said it was disappointing that sterling's 20 percent fall over the past two years had not had more of an impact.

"The further sharp decline in export orders is of particular concern as we are not seeing much of a boost from the relative weakness of sterling," said Ian McCafferty, chief economic adviser to the CBI.

"There are also further indications that the inventory cycle may not be turning as quickly as many had hoped."

The quarterly survey showed conditions had improved since earlier in the year but remained tough, particularly for small firms that were still finding it hard to access finance.

The quarterly business situation balance improved to -16 in July, its least negative reading since October 2007, from -40 in April.

Overall the balance of firms citing credit constraints as a problem fell to 5 in July from 26 in April but the CBI said that improvement should not be interpreted to mean that credit is flowing freely again.

The survey showed exporters were still struggling to get finance, with a net balance of 15 citing credit constraints in July, up from 12 in April and the highest since January 1973.

Small companies less able to raise funds in equity and debt markets were also finding it tough.

"Credit conditions may have improved for larger sized companies but for small- and medium-sized companies are still being constrained," McCafferty said.