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UK’s SME manufacturers report record falls in output

04 August, 2020

In the three months to July, output volumes from SME manufacturers in the UK fell at the fastest rate on record, according to the Confederation of British Industry’s latest quarterly SME Trends Survey. The survey of 331 SME manufacturers found that new orders – both domestic and export – also declined at the quickest pace since the CBI started the surveys in October 1988.

Despite this, business sentiment improved slightly during the quarter, following a record decline in April, while export sentiment fell at a much slower pace.

Looking ahead, the SME manufacturers expect output to recover at a slow pace over the coming three months, with new orders roughly unchanged. Domestic orders are expected to be flat, while export orders will fall at a slower pace than during the previous quarter.

In the three months to July, the drop in employee numbers at the UK’s SME manufacturers was similar to the record decline seen during the financial crisis in 2009. The manufacturers expect headcounts to decline slightly faster in the coming quarter.

Investment expectations for the coming year are also gloomy, with a record proportion of firms citing uncertainty over demand and cash-flow, and labour shortages, as factors that will deter them from increasing their capital expenditure.

“SME manufacturers faced an exceptionally challenging quarter due to the Covid-19 crisis,” comments the CBI’s lead economist, Alpesh Paleja. “While firms believe that the worst of the downturn is behind them, ongoing cashflow issues and tough trading conditions mean that they aren’t back on their feet yet. Expectations of another heavy fall in headcounts is a sign of what is to come.

“It’s clear that firms need more immediate support, from grants to further business rates relief, to tide them over until demand conditions improve more substantially.

“SME manufacturers are also dealing with an additional layer of uncertainty from the prospect of leaving the EU without a trade deal,” Paleja adds. “Alongside driving a sustainable recovery, securing an ambitious deal with the EU will be essential to shield firms from a further economic shock, at a time when they are least equipped to cope.”

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