Mixed fortunes for small manufacturers says CBI report

Despite a rise in new orders, optimism among small manufacturers has fallen for the first time this year, according to the latest CBI SME Trends Survey.

The CBI poll of 374 SME manufacturers has found that output growth has slowed over the past three months, although manufacturers expect a modest pick-up in the coming quarter. There are also signs that both capacity pressures and labour shortages are "biting hard", according to the research.

However, the findings are not entirely discouraging. Respondents reported another firm rise in new orders, underpinned by both export and domestic demand.

Furthermore, while firms expect to cut back on investment in buildings and plant and machinery, investment intentions for the year ahead remain above their long-run averages. Growth in headcount and hiring intentions for the coming quarter also remain robust.

Alpesh Paleja, CBI principal economist, said: "The latest survey suggests mixed fortunes for our smaller manufacturers. While growth in new orders has held up and headcount has risen strongly, output growth has lost some steam over the last quarter. Coupled with ongoing pressure from labour shortages, it's understandable that optimism among manufacturers has fallen."

Paleja added: "The chancellor should use the Budget to fire up our factories by reforming business rates, and setting out a clear plan to bring the UK's Industrial Strategy to life."

The CBI's key findings include:

  • 13% of SME manufacturers said they were more optimistic, while 19% said they were less optimistic, giving a balance of -6%;
  • 25% said their volume of output was up, and 17% said it was down, giving a balance of +8%;
  • 35% said their domestic orders were up, while 22% said they were down, giving a balance of +13%;
  • 30% said export orders rose over the past three months, 11% said they fell, leaving a balance of +18%, with firms anticipating that export orders growth will edge higher over the next three months (+23%);
  • 37% of SME manufacturers are employing more people than three months ago, and 13% less - leaving a balance of +25%.
  • Prompt, efficient and clear communication, helped provide a clear understanding of the issues and situation