The manufacturing PMI showed domestic and export order books grew, but so did cost pressures facing factories - something that will increasingly feed into consumer prices next year.
Survey compiler IHS Markit said the survey was consistent with manufacturing output rising at a quarterly pace of around 1.5 percent.
"The boost to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaround, while the domestic market has remained a strong contributor to new business wins," said RobDobson, senior economist at IHS Markit.
Dobson added that higher costs were the flip side of the pound's fall since June's Brexit vote, which has left it down around 10 percent on a trade-weighted basis.
"Of the companies citing a cause of higher costs, 75 percent linked the increase to the exchange rate," Dobson said.
A separate survey of financial officers last week showed business morale has recovered completely its plunge after the Brexit vote. However, companies are reluctant to spend more because of uncertainty about the economic outlook.
IHS Markit said investment and intermediate goods manufacturers performed particularly well in December, which could augur well for investment more broadly.
Manufacturers hired staff at the fastest rate sinceOctober 2015.
Britain's economy looks on track to expand by more than 2 percent this year - faster than almost all other big advanced economies except perhaps the United States.
Economists polled by Reuters expect Britain's growth rate to more than halve next year to 1.1 percent.