SME manufacturers gloomy about falling output

According to the CBI's latest SME trends survey, small and medium-sized manufacturers are increasingly pessimistic, and output has fallen for the first time since autumn 2009.

by Michael Northcott
Last Updated: 19 Aug 2013

It seems that the UK manufacturing sector is truly running out of steam, after the CBI’s latest quarterly SME Trends Survey showed that manufacturing output amongst small and medium-sized companies has fallen to a balance of -5%. This means that 23% reported an increase, and 28% reported a decrease, hence the ‘balance’. This is the first time that the balance has fallen since October 2009 when it was -19%. They do not anticipate output falling any further, though – firms expect output to be flat in the coming quarter but any negative numbers only compound the UK’s economic problems.

Dig deeper into the numbers and the situation is trickier than meets the eye. Actual export orders fell to a balance of -4%, whilst domestic orders remained flat, meaning less money coming into the UK economy, and no increase in cash moving around internally. Of the 359 SME manufacturers surveyed, a balance of -12% said they expected exports to fall, and -5% said domestic orders would fall too over the coming three months.

The chair of the CBI’s SME Council, Lucy Armstrong, said the eurozone crisis, a slowdown in global growth and the UK’s recession are ‘clearly taking their toll on the UK’s smaller manufacturers.’ We could have told you that, Lucy. But she did point out at least one encouraging thing: ‘Smaller manufacturers have stuck by their plans to take on more staff – an increase in numbers employed is perhaps one of the few bright spots in an otherwise muted picture.’

Elsewhere in the SME space, there is some solace to be taken today. Accounting firm BDO’s High Street Sales Tracker, published today, found that online sales for medium-sized high street retailers have risen by a ‘dramatic’ 24.9%, even though like-for-like sales in store have fallen 2.9% year-on-year. That is the largest in-store sales drop since last October (when sales were down 3.1%), but with such a boost in online sales, it sounds like consumers are not completely spent…

Whilst the CBI’s figures make depressing reading, there is talk of more stable, modest growth getting underway in 2013. If firms can hold on until then, the CBI might just become the bearer of good news…

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