SME manufacturers see orders hit 3-year high – CBI survey

SME manufacturers in the United Kingdom are seeing strong growth in both home and export orders, according to new figures for the three months leading up to April 2017. However, the trend is also accompanied by a continued rise in costs and prices.

In this article, the term ‘orders’ refers to confirmed purchases. When I place an order I am telling the seller that I am purchasing something.

The latest Confederation of British Industry (CBI) quarterly SME Trends Survey of 373 UK manufacturing small and medium enterprises (SMEs) finds that optimism about the current business climate rose at its fastest rate in nearly 3 years, while optimism about exports is at an all-time high.

SME manufacturers - welding - pixabay 2262745Over a third of SME manufacturers in the UK say that their employee numbers are up on the last quarter. Image: pixabay-2262745

The survey – which was carried out before the forthcoming general election in June was announced – shows that growth of total new orders was the highest it has been in 3 years.

The growth is fuelled by solid rises in orders from both domestic and overseas markets, with the latter showing the fastest rise since the middle of 2011.

This strong growth in orders is matched by a similar boost in output growth – which is at a 6-year high.

Might SME manufacturers alleviate pressure on margins by raising their prices to customers?

The CBI say these trends are likely to strengthen further in the next quarter.

However, the industry body says that a weak pound and rising inflation is likely to keep pushing up unit costs and prices, which have also seen the strongest rises in 6 years.

Alpesh Paleja, Principal Economist for the CBI says such continued increase in costs and prices “is putting considerable pressure on manufacturers’ margins, and so we’re likely to see further pass-through to consumer prices ahead.”

Also, plans to invest in plant, buildings and other assets – which had shown improvement in the previous two quarters – have dipped, although they seem to holding above the long-term average.

Some of the report’s key findings

– The difference between the proportion of SME manufacturers reporting an increase (38 percent) in total order volume and the proportion reporting a decrease (18 percent) is 20 percent, the highest it has been since April 2014.

– There is also a similar positive difference (18 percent – the highest since April 2011) between the proportion who reported an upswing in the last quarter’s output (31 percent) and the proportion who said it fell (13 percent).

– When asked how they felt about the general business situation compared with 3 months ago, 31 percent of firms said they were more optimistic compared with 15 percent who said they were less, giving a difference of 17 percent. However, when asked about export prospects in particular, the difference was a record plus 32 percent.

– The growth in output and orders is paralleled by growth in employee numbers. Just over a third (34 percent) of SME manufacturers said they have hired more workers, compared with 11 percent who said employee numbers are down. The difference between these two figures (plus 23 percent) is the highest it has been since July 2014.