WiredGov Newswire (news from other organisations)
CBI - SME manufacturers report slump in activity easing
SME manufacturing output fell at a considerably slower pace in the three months to October, following July’s record decline, according to the latest quarterly CBI SME Trends Survey.
The survey of 285 SME manufacturers reported that total new orders stabilised, following a survey-record pace of decline last quarter. Domestic orders were broadly unchanged, and export orders fell at a more moderate pace.
But while the decline in employment also slowed from the last quarter, the cut in headcount among SME manufacturers remained significant.
Business sentiment was roughly unchanged in the quarter to October, following a slight recovery in July. Export sentiment fell at a similar pace to the previous quarter.
Looking ahead to the next quarter, SME manufacturers expect output to grow at a solid pace. Total new orders are anticipated to pick up slightly, reflecting a slight rise in domestic orders and export orders falling at a more modest pace. Encouragingly, employment is also expected to rise modestly.
While investment intentions for the year ahead remain weak, they have nonetheless improved on the past two quarters. The share of firms citing uncertainty about demand, cash-flow related concerns, and labour shortages as factors to limit capital expenditure also declined considerably from last quarter’s record highs.
Alpesh Paleja, CBI Lead Economist, yesterday said:
“The thaw in activity seems to be melting for SME manufacturers, and it’s encouraging that output and employment is set to grow in the quarter ahead. But a second national lockdown will inevitably mean that prospects are now looking bleaker.
“However, the step up in government support is welcome. In particular, extending the Job Retention Scheme further will give companies the certainty and stability they need to help safeguard jobs. If signs of additional strain are growing among SME manufacturers and their supply chains, the government may need to think about more tailored support in the coming weeks.”
- Output volumes in the three months to October (-15%) fell at a slower pace than in July (-53%, record quick decline). Firms expect output to grow at a solid pace in the next three months (+14%).
- Total new orders in the three months to October were flat (-1%) following a survey record decline last quarter (-56%). Domestic orders were broadly unchanged (+3% from a record sharp decline of -64% in July) and export orders fell at a slower pace than in July (-19% from a record fall of -55%).
- Looking ahead, manufacturers expect total new orders to grow marginally in the next three months (+4%). Domestic orders are anticipated to pick up slightly (+5%), while export orders are expected to fall at a slower pace (-8%).
- Numbers employed in the quarter to October fell strongly (-30%), but at a slower pace than in July (-43%). Firms expect headcounts to pick up somewhat next quarter (+9%).
- Business sentiment in the quarter to October (+1%) was flat following modest growth in July (+9%). Export sentiment fell at a similar pace to last quarter (-24%, from -26%).
- Manufacturers expect investment in buildings (-29%) and plant & machinery (-11%) to decline in the next year, but to a much lesser extent than last quarter. Capital expenditure in product & process innovation is expected to pick up slightly (+6%), while spending on training & retraining (-3%) is anticipated to be broadly unchanged.
- The share of firms citing uncertainty about demand (55% from 75% in July), inadequate net returns (26% from 47%), internal finance shortages (14% from 38% in July), inability to raise external finance (9% from 29% in July), and labour shortages (16% from 33% in July) as factors to limit capital expenditure over the next year declined noticeably from last quarter’s survey record highs.
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