SMEs in upbeat mood, according to survey

Posted on 4 Feb 2016 by Fred Tongue

Small and medium-sized (SMEs) manufacturers have indicated that they are optimistic for the future in a recent survey.

In a CBI survey of 426 SMEs, optimism towards the next quarter of the year is on the rise.

According to the survey, manufacturers reported a flat domestic order book and a small fall in export orders in the three months leading up to January.

Despite the slow end to last year SMEs are positive about the coming three months. Output during the past three months of 2015 increased with growth set to accelerate further in the quarter to April.

Despite average export prices suffering their sharpest fall since 2000, optimism about export opportunities for the year ahead saw an improvement.

SMEs also saw steady employment growth, and according to the survey, over the next 12 months, plan to increase investment in training and product innovation.

SMEs reported steady employment growth, and over the next 12 months, more manufacturers plan to increase investment in training and product innovation.

Rain Newton-Smith, director of Economics, CBI
Rain Newton-Smith, director of Economics, CBI

CBI economics director, Rain Newton-Smith noted: “It’s encouraging to see smaller manufacturers’ optimism and orders stabilising, although the picture remains fairly flat across the board with many firms treading water.

“But there are expectations that domestic orders and exports growth will pick up in the next quarter and many smaller manufacturing firms also plan to invest more in their staff training.

“Global growth prospects remain under the spotlight and while selling prices have fallen, it remains to be seen whether the next three months can match the more positive outlook of smaller manufacturers.”

CEO of Hampshire Trust Bank, Mark Sismey-Durrant commented: “UK SME manufacturers look to be taking a cautious approach, with plans for capital spending on plant and machinery falling by 10% and buildings by 18% in the past three months.

“A reluctance to invest money in the immediate future echoes our own research, which revealed that the average manufacturing SME holds an average £259,773 in their current account, citing a need to create a ‘cash buffer’ in case of economic downturn as the main reason for this.

“Political uncertainty could also be dampening business appetite for growth and impacting on investment plans, with the Brexit vote happening perhaps as soon as June this year. However, SMEs that are holding on to their money in a current account could be missing out on a valuable opportunity to maximise their cash in a business savings account, which typically offers a higher rate of return, providing increased funds for future investment.”