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SME manufacturers lose optimism in face of rising costs - CBI survey

The UK’s SME manufacturers faced the sharpest drop in optimism in the three months to April 2022 since the onset of the pandemic, with new orders growth weakening and survey record-high growth in both costs and prices. The employment picture looked more positive, with headcount growth picking up pace.

The latest CBI SME Trends survey, based on the responses of 234 SME manufacturing firms, found:

  • Business optimism fell at the sharpest pace since the three months to April 2020 (-36% from -7% in January), with export optimism also falling sharply (-25% from -9% in January).
  • Average unit costs grew at the fastest rate in survey history (+90% from +76% in January, data first collected October 1988), as did domestic prices (+60% from +40% in January).
  • Total new orders rose at a slower pace in the three months to April compared with January (+22% from +42%). Firms expect broadly no growth in the next three months (+3%)
  • Output volumes grew at an above average rate in the three months to April, similar to January (balance of +16% from +19%), but growth is expected to slow in the coming three months (+10%).
    • The percentage of SME manufacturers believing that materials/components shortages will limit output in the next three months reached a survey record high in April (71% from 49% in January).
  • Numbers employed picked up at a quicker rate than in the three months to January (+21% compared to +13%), with SMEs expecting this to improve again in the next three months (+26%)
  • Investment intentions for the year ahead weakened across the board compared to January: buildings (0% from +8%), plant and machinery (+17% from +20%) product & process innovation (+13% from +24%), training (+15% from +25%).

Ben Jones, CBI Lead Economist, recently said:

“It is no surprise that SME manufacturers are feeling less optimistic this quarter.  Growth in new orders is expected to come to a halt over the next three months, cost growth is historically strong and concerns over materials shortages continue to rise. This is leading to unprecedented price rises and a hit to investment plans.

“The Government must continue to keep a watchful eye on smaller firms. The extension of support for energy-intensive firms last week was a welcome first step for helping businesses through a difficult period, building greater resilience in the economy. But more could be done to help keep SMEs’ investment plans on track, for example, introducing a permanent successor to the super deduction.”

Notes to Editors:

The April CBI SME Trends survey was conducted between 24 March and 12 April, with 234 SME manufacturers responding.

A balance is the difference between the percentage of companies reporting an increase and those reporting a decrease.

Across the UK, the CBI speaks on behalf of 190,000 businesses of all sizes and sectors. The CBI’s corporate members together employ nearly 7 million people, about one third of private sector-employees. With offices in the UK as well as representation in Brussels, Washington, Beijing and Delhi, the CBI communicates the British business voice around the world.

Media Contact:

CBI Press Office is available 24 hours a day on 0207 395 8239, or email: press.office@cbi.org.uk. Follow the CBI (@CBItweets) and CBI Economics (@CBI_Economics) on Twitter.

 

Original article link: https://www.cbi.org.uk/media-centre/articles/sme-manufacturers-lose-optimism-in-face-of-rising-costs-cbi-survey/

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