Both domestic and export orders among UK small and medium-sized manufacturers fell in the three months to October and production levels continued to contract modestly, but in the coming quarter output is expected to increase slightly and new orders to level off, according to the CBI.
The SME Trends Survey, which had 362 respondents, showed that total new orders fell (a balance of -13%), reflecting declines in both domestic orders and export orders – the former are expected to be flat over the next quarter, while demand for exports is expected to fall further but at a must slower pace.
In line with current demand levels, output reduced modestly for the second quarter running (-9%), but is expected to grow slightly in the next three months (+5%).
Unsurprisingly, the proportion of firms reporting that the levels of orders or sales was a factor likely to limit output over the next three months rose, compared with the previous quarter (74%, the highest percentage since January).
Lucy Armstrong, chair of the CBI’s SME Council, said: “Small and medium-sized manufacturers will be disappointed by the slide in demand during this quarter. Production levels have fallen for the second quarter running and profit margins continue to be squeezed, as output price inflation fails to match growth in costs.
“There are some signs of improving prospects going forward, with firms expecting to increase output slightly in the next three months and more positive investment intentions. But, the economic climate clearly remains tough, with businesses exposed to subdued conditions both at home and in our major export markets.”
Firms’ investment intentions, although remaining negative, improved on the previous survey. Investment intentions for the next 12 months on both buildings (-6%) and plant and machinery (-3%) moved back above their long-run averages, against weaker outcomes last quarter (-20% buildings, -13% plant and machinery).