Small manufacturers benefit from the UK’s economic recovery

Output is rising among manufacturing firms as small businesses continue to benefit from economic recovery.

Smaller manufacturers are still benefiting from the UK’s economic recovery, in spite of the pressures stemming from slacker global demand.

That’s the view of the latest SME Trends Survey from the Confederation of British Industry (CBI), which found that manufacturing companies are benefiting from stronger domestic demand at a time when export orders are harder to come by.

According to the latest survey of small and medium-sized enterprises (SME), domestic orders among manufacturers increased for the fifth quarter in a row over the three months to October.

Some 36 per cent said domestic orders were up, while 22 per cent reported a decline, leaving an encouraging balance of +14 per cent.

However, a balance of -13 per cent actually indicated that export orders had fallen over the same period. Slack demand from the eurozone is likely to have contributed: Germany has just narrowly avoided recession and other economies such as France are still struggling to get back on their feet. The single currency area constitutes the UK’s biggest export market, and it is likely that manufacturers are still feeling the effects of lacklustre performance.

Optimism for the future is still common among SME manufacturers, with a balance of +4 per cent expecting an upswing in orders from overseas markets in the coming quarter. But these firms are more confident in demand at home, with +17 per cent saying they expect domestic orders to keep rising in the next three months.

That also explains why so many are taking on new staff.

The balance of SME manufacturers who employ more people than they did three months ago is +17 per cent, while +10 per cent said they plan to increase their headcounts in the next quarter.

While the government has been working to rebalance the economy in favour of exports, that may be less achievable as the UK’s recovery outstrips many of its closest rivals.

“It’s reassuring to see smaller manufacturers sharing in the continuing recovery, with optimism, output and jobs all rising over the last three months,” says CBI director of economics Rain Newton-Smith. “Sales in the strengthening UK market are looking good but firms are finding export orders much harder to secure.

“But, sentiment is still improving and firms expect overall orders and output to expand at a healthier pace over the next three months.”