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CBI survey: SME production up but optimism down

The UK's small and medium-sized manufacturers saw a rise in the volume of output in the three months to July, but business optimism fell sharply, according to the latest CBI Quarterly SME trends survey.

The CBI survey of 472 firms reported that total new orders and new domestic orders were relatively unchanged in the past quarter. However, firms expect these to fall over the next three months and business optimism has fallen at its fastest pace since January 2009.

Investment intentions in the year ahead are also cautious, according to the CBI. Investment in buildings, plant and machinery has been scaled back, but SME manufacturers intend to increase spending on product innovation and training for staff to tackle the skills gap.

Optimism about export prospects for the year ahead rose slightly, with SMEs reporting the first improvement in competitiveness in EU and non-EU markets since 2013. Although the volume of export orders fell again on the previous quarter, the poll shows that SMEs anticipate that they will rise in the coming quarter.

The key data in the CBI survey shows that:

  • only 8% of SME manufacturers said they were more optimistic, while 53% said they were less optimistic, giving a balance of -44% - the sharpest fall in optimism since January 2009;
  • companies expect output to be flat in the next quarter (+1%) and domestic orders are expected to fall;
  • export orders went down by a balance of -8%; but firms anticipate export growth in the next three months;
  • hiring intentions are flat for the next quarter.

Rain Newton-Smith, CBI Director for Economics, said: 

"The UK's SME manufacturers reported higher production [and] more staff hired and now expect to sell more of their world-class goods overseas over the next quarter, with a weaker sterling having a hand in this. But overall they do feel less optimistic. Naturally, much of the concern is related to uncertainty and business wants to now see the new Government deliver a clear plan and timetable for the EU negotiations ahead, while cracking on with immediate domestic priorities."

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