SME orders shrink at home and abroad

DOMESTIC and export orders among the UK’s small and medium-sized manufacturers fell in the three months to October, according to the Confederation of British Industry (CBI).

Data from the employers’ group’s SME quarterly trends survey showed production levels continued to contract modestly, while business sentiment deteriorated for the second consecutive quarter.

However, it said prospects for the coming quarter were better, with output expected to increase slightly and new orders expected to level off.

The survey, which had 362 respondents, showed that total new orders fell (a balance of -13%), reflecting declines in both domestic orders (-11%) and export orders (-21%), with the latter falling at the fastest pace since July 2009 (-32%).

While domestic orders are expected to be flat over the next quarter (-2%), demand for exports is expected to fall further, albeit at a much slower rate (-5%), said the survey.

In line with current demand levels, output reduced modestly for the second quarter running (-9%), but is expected to grow slightly in the next three months (+5%), said the CBI.

Lucy Armstrong, chair of the CBI’s SME Council, said: “Small and medium-sized manufacturers will be disappointed by the slide in demand during this quarter. Production levels have fallen for the second quarter running and profit margins continue to be squeezed, as output price inflation fails to match growth in costs.

“There are some signs of improving prospects going forward, with firms expecting to increase output slightly in the next three months and more positive investment intentions. But, the economic climate clearly remains tough, with businesses exposed to subdued conditions both at home and in our major export markets.”

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