Smaller manufacturers plan investment boost

4 Feb 2014 10:43 AM

The UK’s smaller manufacturers are planning to boost investment in the coming year, according to the CBI’s latest SME Trends Survey.

The survey of 335 small and medium-sized manufacturers revealed that total orders and the volume of output increased in the three months to January. Domestic orders rose, while export orders fell. However, in the coming quarter domestic and export orders are both expected to grow more strongly and production is set to rise again.

Firms increased headcount modestly, while optimism about the business situation improved for the third consecutive quarter. Meanwhile, planned investment spending on buildings for the year ahead rose to record levels and that on plant and machinery strengthened further.

Stephen Gifford, CBI Director of Economics, said:

"As the recovery takes hold, the investment cycle is starting to turn.

"It’s encouraging to see smaller manufacturers planning to boost investment, particularly in their plant, machinery and buildings.

"Orders and output continued to grow at a healthy pace, although not as fast as predicted. However, firms remain optimistic about prospects, with growth in orders and production expected to accelerate."

Key findings – three months to January

37% of firms reported an increase in total new orders and 23% said they decreased, giving a balance of +14%
34% of firms reported an increase in domestic orders and 26% said they decreased, giving a balance of +8%, a slower pace of growth than in the previous survey (+20%)
23% of firms said export orders increased and 30% said export orders fell, giving a balance of -7%
30% of firms said output increased and 24% said output decreased, giving an overall balance of (+6%), a broadly similar result to the previous survey (+8%), with growth predicted to pick up in the next three months (+14%)
Optimism continued to rise for the third consecutive quarter: 34% of respondents said they were more optimistic than three months ago and 13% said they were less optimistic giving a balance of +21%: a more moderate rise in sentiment than in the last quarter (+35%, which was the fastest rise in optimism on record)
Manufacturers’ investment intentions have improved significantly further on the previous quarter, with plans to spend on buildings (+14%) at their strongest since the data began in October 1988 and plant and machinery investment intentions (+14%) at their strongest since July 1995
Numbers employed grew slightly (+4%), disappointing expectations of faster growth (+14%). Headcount is expected to increase moderately again in the coming quarter (+6%)
Average unit costs were flat on the quarter (0%), the lowest result since 2000 and are expected to rise modestly in the coming quarter (+8%)
Average domestic prices remained flat (0%) for the fifth consecutive quarter, while export prices fell somewhat (-9%). Domestic prices are expected to rise in the next three months (+12%), while export prices are set to be unchanged (+3%).

Note to Editors

The CBI SME Trends Survey was conducted between 16th December and 9th January. 335 smaller manufacturing firms replied. During the survey period the pound averaged €1.20 and $1.64, while Brent Crude averaged $110 per barrel, compared with €1.19 and $1.61, and $109 per barrel in the October survey period.