The Confederation of British Industry’s (CBI) latest quarterly industrial trends survey for SME manufacturers shows orders are down, output has bottomed and that credit and finance issues are increasingly becoming a limitation on exports.
Where a balance is the difference between the number of firms that registered a rise and the number of firms that registered a fall, orders recorded a balance -51% while output was -48%. Both of these figures were the lowest in their respective categories since the survey began in 1988.
Half of the firms that responded to the survey laid off staff during quarter one and only six per cent took new employees on. The resultant balance of -44 is again a survey low. The trend is set top continue over the next three months but at a slower pace; employment intentions registered a balance of -32%.
The breakdown of the order figure was -52% for domestic orders and -39% for exports.
“It has been a torrid few months for smaller manufacturers. With orders and output falling at the fastest rate since this survey began, many firms have had no option but to let staff go,” said Russel Griggs, Chairman of the CBI’s SME Council.
“Although companies seem hopeful that the pace of decline in manufacturing activity may be moderating slightly, the next three months are still going to be very tough for many firms.
When asked about reasons why capital expenditure could be limited over the coming year, 70% of firms pointed to uncertainty over demand. This mirrored the results in January. However, this problem seems to be getting better for mid-sized firms but worse for small ones. In March, 62% of medium sized firms ticked uncertainty over demand compared with 77% in January. For small firms it was 72% and 68% respectively.
Money to be spent on process and product innovation over the next 12 months will be 36% down compared with the previous 12 months. Training and retraining budgets will be 34% less.
Griggs hinted that the figures could represent manufacturer’s ‘worst case scenarios’ and that government fiscal stimulation measures might brighten up a few horizons.
“This survey shows worries about credit and finance are continuing to constrain some firms’ plans,” he said, “but we are hopeful that recent government and monetary measures should see access to credit getting easier in the coming months.
“It is also worth noting from my own conversations with businesses around the UK, that some firms are holding up relatively well, despite the challenging circumstances.”
Overall, 74% of factories are now running below capacity.