Business optimism
amongst SME manufacturing firms deteriorated in the three months to July, at
the fastest pace since July 2016. That’s according to the latest
quarterly CBI SME Trends Survey.
In a survey of 268
small and medium-sized manufacturers, optimism about export prospects for the
year ahead also worsened, to the greatest extent since the financial crisis
(April 2009).
Activity was weak
among SME manufacturers, with both domestic and export orders falling at the
quickest rates in several years (since April 2013 and October 2015
respectively). In addition, output stagnated following three years of
continuous growth. Firms expect domestic orders to continue falling over the
next three months, and output and export orders to remain flat.
Other results
include:
- Investment intentions for the
next year remained poor, with manufacturers expecting to spend less on
buildings, plant & machinery, and training & retraining. Capital
expenditure on products & process innovation is expected to be flat
relative to the past year
- Growth in stocks slowed
noticeably, following a record-high pace of growth (for raw materials and
finished goods stocks) last quarter. Nonetheless, stocks of raw materials
particularly continued to grow significantly. Manufacturers expect
inventories of all categories to fall slightly next quarter
- Headcount was flat in the
quarter to July, following six years of continuous growth, and is expected
to remain broadly steady next quarter
- Growth in output prices also
slowed sharply, with domestic prices flat and export prices falling, both
following continuous growth over the last two-and-a-half years. This
continued to be outpaced by costs inflation, albeit with the latter
slowing on the previous quarter.
Alpesh Paleja, CBI
Principal Economist, said: “Against the backdrop of slower global growth and
continued Brexit uncertainty, optimism among SME manufacturers is waning.
With orders falling and output and headcount stalling, the new Prime Minister must
restore confidence and set out a pro-enterprise path that supports SME
manufacturers.
“Securing a Brexit
deal ahead of the October deadline remains a top priority for smaller
manufacturers. Firms will also be looking for early signs of how domestic
priorities – from fixing the apprenticeship levy to improving infrastructure –
will be delivered.”
