Small manufacturers confident despite fewer orders

SMALL and medium-sized manufacturers saw orders and output continue to fall in the three months to April, although firms are expecting both to grow in the next quarter, according to the Confederation of British Industry’s latest SME Trends survey.

This decrease in total new orders was driven by falls in both domestic and export demand, disappointing firms’ expectations that it would pick up.

Output also fell for the fourth consecutive quarter. However, manufacturers expect output to grow slightly over the next three months, on the back of strong predicted growth in export orders, while domestic orders look set to stabilise.

Despite weaker than expected activity, optimism about the overall business situation has steadied, following three quarters of decline. Meanwhile, optimism about export prospects rose for the first time in a year.

Employment in the sector ticked up in the three months to April, and manufacturers expect a modest increase in headcount in the coming quarter.

Stephen Gifford, CBI director of economics, said: “It’s been another disappointing quarter for small and medium-sized manufacturing firms, who have seen new orders and output continue to fall.

“Nonetheless, firms do expect to raise output a little in the coming three months. The recent weakening in Sterling will have boosted the competitiveness of the UK’s smaller manufacturing firms, with a strong pick-up in export orders predicted.

“But conditions will remain challenging for the sector. Fears about the impact of political and economic conditions abroad on export demand have risen and there is little sign in this survey that credit conditions are improving.”