SME manufacturing output grows strongly

Sme manufacturing

Output among the UK’s small and medium-sized manufacturers grew at the fastest pace in seven years, according to the latest quarterly SME trends survey, though optimism about the current business situation was broadly flat.

The survey also found that total new orders had continued to rise at a strong pace in the three months to July, with export order growth the highest since April 2011. When queried about what may constrain output over the next quarter, the proportion of firms citing orders or sales was the joint-lowest on record.

Employment rose at a robust rate and hiring intentions for the next quarter remain solid. The survey found that 28 per cent of manufacturers said employee numbers were up, and 11 per cent said they were down, giving a balance of +17 per cent. However, respondents’ concerns that skilled labour shortages may limit output in the near-term rose to the highest since October 1989.

Investment intentions were broadly unchanged compared with the previous quarter, remaining at above-average levels; the exception was planned capital expenditure on product and process innovation, which strengthened slightly.

Cost pressures remained high though eased compared with the previous quarter, with further moderation anticipated. Similarly, the price of manufactured goods leaving the factory gates continued to rise at a strong pace relative to the first quarter. Looking ahead, the price of goods for the UK market are expected to rise at a softer pace whereas those for overseas destinations are expected to continue rising strongly.

The research revealed that 19 per cent of firms said they were more optimistic about the general business situation than three months ago and 17 per cent were less optimistic, giving a balance of +2 per cent. Optimism about export prospects for the year ahead rose at a robust pace.

Alpesh Paleja, CBI Principal Economist, said: “It’s encouraging that activity among SME manufacturers has risen strongly over the past three months. Firms are clearly in an exporting sweet spot, able to exploit the competitiveness gains from a low exchange rate and a firm global backdrop.