Optimism slips among manufacturers

Smaller manufacturers are feeling less confident about the future, a new survey has indicated.

The latest quarterly SME Trends survey from the CBI reveled that many small manufacturers expect little or no growth in demand and output over the coming quarter, and are reappraising their business plans as a result.

Of the respondents to the poll, 18 per cent said they are more optimistic about the future than three months ago, but 28 per cent claimed to be less optimistic.

The balance of -10 per cent was, the CBI pointed out, the first marked decline in confidence in two years.

The report suggested that, while orders and output were still strong, businesses are entertaining serious doubts about the sustainability of such growth.

In the three months to July, total orders rose strongly once again (a balance of +19 per cent), and factory output continued to grow (+12 per cent) at a pace above the long-run average.

However, firms expect orders and production to be broadly unchanged over the next quarter (at +3 per cent and +2 per cent respectively), and are reappraising their business plans as a consequence.

Lucy Armstrong, chair of the CBI’s SME council, commented: “Orders and production have been strong for the UK’s smaller manufacturers this quarter, but growth is expected to stagnate in the next, and sentiment has fallen for the first time in two years.”

Ms Armstrong also highlighted the dent in confidence caused by global economic uncertainty over issues such as the euro crisis and the US debt ceiling.

She added: “As a result, manufacturers are re-assessing their business plans. They do not expect to take on any more staff in the next three months and intend to invest less in the year ahead.”