Eurozone uncertainty adds to pressure on small firms

The squeeze on smaller manufacturing firms is highlighted in a survey showing their worst output performance in more than two years.
By The Newsroom
Published 6th Aug 2012, 11:55 BST

In the Confederation of British Industry’s (CBI) latest quarterly SME (small and medium-sized enterprise) trends report, the 
percentage of respondents reporting weaker activity outstripped those seeing higher volumes for the first time since October 
2009.

The CBI said the continuing uncertainty over the eurozone and a broader loss of momentum in global growth were being felt by smaller manufacturers.

Hide Ad
Hide Ad

Alongside the deterioration in activity, optimism about the general business situation has fallen back following an improvement in the previous quarter.

Firms also plan to lower capital expenditure in the year ahead and expect to hold off hiring over the current quarter, the CBI added.

Out of 359 respondents, 23 per cent reported output volumes increased in the three months to July, while 28 per cent said they had fallen.

While the resulting balance of minus five per cent was the worst since minus 14 per cent in October 2009, a majority of firms still expect output to be broadly flat in the coming quarter.

Hide Ad
Hide Ad

The breakdown in the survey showed a slight fall in export orders in the quarter to July while domestic orders were flat.

Both are expected to decline over the coming three months, 
according to the SME firms 
polled.

Despite falling output and orders, SMEs increased head count in the quarter to July, though they expect to hold off hiring in the next three months, according to the survey.

Lucy Armstrong, who heads the CBI’s SME Council, said: “Challenging domestic conditions, continuing uncertainty over the Eurozone, and a broader loss of momentum in global growth, are clearly taking their toll on the UK’s smaller manufacturers.

Hide Ad
Hide Ad

“Production has fallen over the last three months and sentiment has deteriorated, while growth in demand has stalled, with little improvement expected in the coming quarter.

“Nonetheless, smaller manufacturers have stuck by their plans to take on more staff – an increase in numbers employed is perhaps one of the few bright spots in an otherwise muted picture.”

The findings echo last week’s Markit/CIPS purchasing managers’ index (PMI), which contracted for a third month in a row in July.