Factories revisit plans as optimism falls

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Businesses surveyed intend to invest less in the year ahead, says CBI’s Lucy Armstrong

Small and medium-sized UK manufacturers expect no growth in demand and output over the coming quarter, and are reappraising their business plans as a result.

This was the message from the CBI last week, based on the results of the 411 respondents to the CBI’s latest quarterly SME trends survey, with 18% of manufacturers reporting they are more optimistic than three months ago, and 28% saying they were less optimistic.

The resulting balance of -10% marks the first notable decline in sentiment in two years, the CBI said, and is against expectations that growth in activity will not hold up in the next three months. Total orders rose strongly once again (a balance of +19%) in the three months to July, and factory output continued to grow (+12%) at a pace above the long-run average. However, firms expect orders and production to be broadly unchanged over the next quarter (at +3% and +2% respectively).

Lucy Armstrong, chair of the CBI’s SME Council, said: “Orders and production have been strong for smaller manufacturers this quarter, but growth is expected to stagnate in the next, and sentiment has fallen for the first time in two years. Confidence has also been affected by global economic and political uncertainty over issues.

“Manufacturers are re-assessing their business plans. They do not expect to take on any more staff in the next quarter and intend to invest less in the year ahead.”