The rate of decline in orders and output was significantly reduced in the three months to July for SME manufacturers, according to the latest Industrial Trends Survey from the CBI.
Although 51 per cent of firms saw new orders fall, 17 per cent saw a rise. The balance of -34 per cent is a marked improvement on the -51 per cent balance reordered in the previous three months. For output, 43 per cent reported a decline while 15 per cent said it rose. The resultant -28 per cent balance is also testament to a slowing decline, as output recorded a -48 per cent balance in the three months to April.
The CBI’s survey also found SMEs are expecting a further considerable improvement over the next three months, owing to a forecasted surge in export orders. Overall orders are expected to be down by a balance of -8 per cent and output by -9 per cent. But medium sized businesses on their own are actually expecting a rise of 10 per cent in total new orders thanks to a 27 per cent climb in demand from overseas.
“So far, the relative weakness of Sterling has not provided firms with much of an export boost,” said the CBI’s SME Council chairman, Russel Griggs. “It is therefore encouraging that medium-sized companies are hopeful overseas orders will pick up in the next quarter, helping raise total orders and output. Medium-sized firms are also benefiting from improved access to credit, unlike smaller companies which tend to have fewer funding options available to them.
Though “business conditions remain difficult,” said Griggs, “things aren’t quite as gloomy as they were three months ago.”
He warned that it is currently unclear whether the boost in foreign orders will lead to a sustained recovery though and said it is also uncertain at the present time when smaller firms will also begin to benefit.
Employment figures have improved slightly for SMEs but numbers are still falling at a significant pace. Forty per cent of firms reduced headcounts over the quarterly period while eight per cent added names to their payroll. The balance of -32 per cent compares with -44 per cent in the previous quarter.
Firms are also continuing with destocking initiatives and seven out of ten SME factories are currently running under capacity.