Small and mid-sized manufacturers' optimism deteriorates

Latest News Thu, Aug 1, 2019 1:38 PM

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.”

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