SME manufacturers expect to see a rise in orders and production

In the CBI’s latest quarterly SME Trends Survey, which had 356 respondents, a balance of 22 per cent said they were more optimistic regarding the business situation in the three months to April. This figure represents the first rise in sentiment in a year (12 per cent in April 2011).

Over the past three months the volume of total new orders rose modestly (8 per cent), and is expected to see faster growth over the next three months (27 per cent), driven by upturns in both domestic and export order growth.

Output was broadly flat for the second quarter running (1 per cent), but, like orders, is expected to see a significant increase in the next three months (19 per cent).

Similarly, SMEs also expect to increase employment (16 per cent) in the next quarter, having held headcount steady in the three months to April (1 per cent).

With sentiment recovering, firms are raising their investment intentions. Respondents plan to raise capital expenditure in the year ahead compared to the past twelve months, with investment intentions for plant and machinery turning positive for the first time in a year.

However, economic uncertainty continues to be a factor influencing sentiment. Although SMEs expect export orders to rise, concern about political and economic conditions limiting export demand has continued to pick up. Nonetheless, orders and sales have fallen back as a factor likely to limit output in the coming quarter.

Lucy Armstrong, Chair of the CBI’s SME Council, said: “Small and medium-sized manufacturers are feeling more optimistic for the first time in a year, an encouraging development given the important role that they play in our economy.

“Indeed, firms expect orders and output to rise strongly in the coming quarter and plan to invest more in the year ahead, pointing to growing momentum in manufacturing activity.”

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