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Slump in activity eases for British SME manufacturers

Suban Abdulla
·3-min read
Man working on bicycle in workshop
The survey of 285 SME manufacturers shows a decline in the number of firms being worried about staff shortages, cash flow and demand for goods and services. Photo: Getty

Manufacturing output among small to medium sized manufacturers (SMEs) fell at a considerably slower pace in the three months to October following July’s record decline, according the a new report.

Output in October fell to -15% up from record-lows of -53% in July.

The Confederation of British Industry’s (CBI) quarterly SME Trends Survey indicates new orders stabilised following a record pace of decline in the summer.

Domestic orders didn’t see much change rising +3% from a record sharp decline of -64% in July.

Meanwhile, export orders fell at a slower pace than in July to -19% from a record fall of -55%.

The survey of 285 SME manufacturers shows a decline in the number of firms being worried about staff shortages, cash flow and demand for goods and services.

While the decline in employment has slowed, job cuts among SME manufacturers were significant in the latest quarter, the CBI said, although employment is now expected to rise modestly in the coming months.

The numbers employed in three months to October fell strongly to -30% — but at a slower pace than in July (-43%). Companies expect headcounts to pick up in the next three months (+9%).

Investment plans by smaller manufacturing firms have improved in recent months but still remain weak for the year ahead.

29% of firms expect investment in buildings to decline, with 11% of those surveyed anticipating a decline in investment in plant and machinery.

Capital expenditure in product and process innovation is expected to pick up by +6%, while spending on training and retraining (-3%) is anticipated to be mainly unchanged.

Looking ahead, SMEs expect total new orders to grow marginally in the next quarter rising by +4%.

Domestic orders are anticipated to pick up slightly (+5%), while export orders are expected to fall at a slower pace (-8%).

READ MORE: Almost one-fifth of SMEs believe they won't survive second UK lockdown

CBI lead economist Alpesh Paleja said: “The thaw in activity seems to be melting for SME manufacturers and it’s encouraging that output and employment is set to grow in the quarter ahead.

“But a second national lockdown will inevitably mean that prospects are now looking bleaker.

“The step-up in government support is welcome. In particular, extending the job retention scheme further will give companies the certainty and stability they need to help safeguard jobs.

“If signs of additional strain are growing among SME manufacturers and their supply chains, the Government may need to think about more tailored support in the coming weeks.”

A separate study showed that, nearly one fifth of UK SMEs believe that they will be unable to survive a second lockdown.

Small business insurer Simply Business revealed in a survey of more than 500 SME owners across the UK that 17% of SMEs think they will be forced to close their doors for good as the economy shuts down for the second time.

It also found that 32% of SME owners felt they would be impacted worse than the first lockdown but would survive, while a further 34% felt a second lockdown would have the same impact as the first.

Just 5% of those surveyed believed they would cope better than the first.

Watch: Why can't governments just print more money?