Optimism Soars Amongst Smaller Manufacturers on Back of Strong Growth in Orders and Output

May 12, 2014 2:12 pm

CBI

Optimism amongst the UK’s smaller manufacturers has surged to its highest level since records began in 1988, according to the CBI’s latest SME Trends Survey.

That optimism is evidenced through by small and medium-sized manufacturers saying that total orders and output rallied in the three months to April.  Numbers employed also enjoyed a sharp boost, and employment is expected to grow at an even stronger pace during the next quarter.

The survey of 366 SME manufacturers showed that domestic orders rose strongly, whilst export orders bounced back from a fall in the previous quarter. Both are expected to see robust growth in the next quarter.  Output grew solidly for the third consecutive quarter, with output expectations for the next three months at their highest level since January 1995.

Firms’ investment intentions for buildings in the year ahead are flat, but spending for plant & machinery remains firmly positive, at its strongest level since July 1995. All this evidences strong signs of optimism within this key employment sector.

Katja Hall, CBI Chief Policy Director, said: “It’s very encouraging to see record levels of optimism among smaller manufacturers, on the back of robust growth in domestic and export orders, and a leap in output levels.  Hiring is also on the up, and is set to strengthen as we look ahead into 2014.  As confidence beds in, we need to see more firms exporting their products to high-growth markets across the globe, giving a healthy and sustainable boost to the UK’s recovery.”

Key findings – three months to April

  • 39% of firms reported an increase in total new orders and 19% said they decreased, giving a balance of +20%
  • 36% of firms said domestic orders increased and 18% said they decreased, giving a balance of +18%
  • 25% of firms reported an increase in export orders and 16% said they fell, giving a balance of +9%, jumping back from a fall in the previous quarter, where the balance was -7%
  • 33% of firms said output increased and 16% said it decreased, giving a balance of +17%, with growth next quarter predicted to rise to its fastest pace since January 1995 (+23%)
  • 46% of firms said they were more optimistic regarding their business situation, while 10% said they were less optimistic, giving a balance of +36%. This was the fourth consecutive rise in business optimism, with the survey balance the highest on record (since October 1988)
  • Optimism about export prospects rose for the fifth consecutive quarter to a balance of +26%
  • Numbers employed rose sharply (+16%), outpacing expectations (+6%). Robust growth in headcount is expected in the coming quarter (+24%)
  • Manufacturers’ investment intentions remain well above their long-run averages. Plans to invest in buildings in the year ahead (relative to the last twelve years) were broadly unchanged (-3%) while plant and machinery investment intentions remained firmly positive, and at their strongest since July 1995 (+14%)
  • Average unit costs rose moderately (+9%), after having been flat in the previous quarter and are set to pick up further next quarter (+16%)
  • Average domestic prices increased slightly (+9%), after having stayed largely unchanged for two years, and modest growth is set to continue in the next three months (+9%). Export prices remained broadly flat (-2%), and are expected to remain unchanged over the next quarter (-3%).

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