Supply chain ยท 2 November 2015

Small manufacturers’ optimism flounders as output drops

Export orders lost their spark, declining at their fastest pace since 2009
Export orders lost their spark, declining at their fastest pace since 2009

The CBI has found output among small and medium-sized manufacturers fell in the three months to October, with both domestic and export orders dropping. Business optimism also fell.

Surveying 434 smaller firms, the CBI SME Trends report found output growth had fallen at its fastest pace since January 2013. Domestic orders also fell for the first time in over two years and export orders declined at their fastest pace since 2009.

The CBI did though, predict domestic orders and output would steady in the coming quarter, while exports are expected to decline at a slower pace.

The struggle for smaller firms has made itself known, with business optimism dropping for the first time since January 2013, along with optimism over export prospects in the year ahead. Firms no longer expect to increase expenditure on product and process innovation?in the near future either.

Rain Newton-Smith, CBI director of economics, said: ?As demand has fallen, especially in the face of a strengthening pound, our smaller manufacturers have had a tough quarter, with orders and output volumes dropping.?

While she said manufacturers expect conditions to stabilise somewhat over the quarter ahead, they also ?remain concerned about the outlook for demand?.

?Innovation and technology are crucial to driving productivity and that’s why it’s vital the government uses the Comprehensive Spending Review to prioritise spending that supports skills and innovation, spurring a revival in productivity growth in the UK,? Newton-Smith advised.

While 26 per cent of small and medium-sized firms reported an increase in total new orders, 38 per cent said they decreased. The prediction for the next quarter is modest growth of around four per cent.

Some ten per cent of businesses reported an increase in export orders, with 46 per cent saying they fell ? giving a rounded balance of -35 per cent, the lowest since April 2009 when it was -39 per cent. Firms anticipate orders to fall at a much slower pace over the next three months ? -8 per cent.

When it came to optimism, 22 per cent of businesses said they were more optimistic about their business situation, while 29 per cent said they were less optimistic, while their hopes for export prospects also fell.

According to Markit PMI, UK manufacturing reached a 16-month high in October, recording its best month since June 2014, but the upturn was largely confined to the biggest manufacturers ? which also benefitted most from the improved export sales.

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Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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