Output and new orders growth among the UK’s small and
medium-sized (SME) manufacturers picked up considerably in
the three months to July. That’s according to the latest
quarterly SME Trends Survey.
The survey of 324 respondents showed that total
new orders rose at their fastest pace since 1995, off the back of
strong growth in both domestic and export orders – both
surpassing expectations of much weaker growth. Output also rose
strongly over the past three months, but SMEs expect to see a
significant slowing in the pace of growth for both production and
orders over the next quarter, with domestic orders expected to
flatten out. Optimism about export prospects in the year ahead
also rose at a much slower pace.
Investment intentions were also a mixed bag.
Firms expect to increase spending on plant & machinery in the
year ahead, with investment plans at their strongest in the
survey’s history (since October 1988). But investment on
intangible areas – product & process innovation and training
and retraining – is expected to fall at a pace unseen since the
financial crisis.
Numbers employed again grew strongly again,
matching the record pace seen in the previous quarter. However,
concerns over skill shortages rose, with the number of firms
citing skilled labour as a factor likely to limit output rising
to its highest since 1988.
Pricing pressures also remained intense.
Average unit costs growth remained elevated, and domestic prices
also continued to rise strongly. In the face of continuing cost
pressures, firms have been stockpiling, with growth in stocks of
both raw materials and work in progress the fastest on
record.
Alpesh Paleja, CBI Principal Economist,
said:
“SME manufacturers will be feeling buoyant
after a period of strong growth in orders and production. But
cost pressures remain stubbornly high, and the clouds of
uncertainty are still looming large, as seen in the deterioration
in firms’ plans for investment in “intangible”
areas.
“The retrenchment of training budgets is
worrying at a time when skills and labour shortages are really
biting hard, and highlights the need for urgent reform of the
Apprenticeship Levy, so that it truly delivers for people and
businesses.”
Key
findings:
-
46% of firms said the volume of output
over the past three months was up and 12% said it was down,
giving a balance of +34%, the fastest pace of growth on record
(since October 1988). Growth is expected to slow next quarter
(+12%)
-
22% of firms said they were more
optimistic about the general business situation and 17% were
less optimistic, giving a balance of
+4%
-
46% of businesses reported an increase
in total new orders, and 15% a decrease, giving a balance of
+31% - marking the fastest growth since
1995
-
This was underpinned by strong domestic
(+20%) and export orders growth
(+35%)
-
36% of manufacturers said employee
numbers were up and 9% said they were down, giving a balance of
+26% - the same as the previous
quarter
-
46% of manufacturers reported an
increase in average unit costs, and 8% said they were down,
giving a balance of +38%
-
Concerns over skilled labour as a factor to
limit output (31%) were the highest since October
1988.
Key findings – looking
ahead:
-
Total new orders (+10%), export orders
(+12%) and output (+12%) are expected to grow at a slower rate
over the next quarter, and domestic orders are expected to be
broadly flat (+2%).
-
Growth in average domestic prices
(+15%), export prices (+11%) and unit costs (+28%) is also
expected to slow over the next
quarter.
1 August
2018
Notes to
Editors:
The July 2018 CBI Quarterly SME Trends
Survey was conducted between 26th June and 12th July. 324 SME
manufacturing firms replied. During the survey period, the pound
averaged €1.13 and $1.32, while Brent Crude averaged $76 per
barrel, compared with €1.15 and $1.41, and $67 per barrel in the
April survey period.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.
