Two new surveys from the CBI show that while the manufacturing sector as a whole is struggling, smaller manufacturers report increases in total domestic orders, output and numbers employed in the three months to April.
The CBI's latest Growth Indicator shows growth in the three months to April is holding up at around the average pace since mid-2014. But it says solid growth in the service sector has compensated for a poorer performance in manufacturing, hit by weak export orders and the rising pound.
However, SME manufacturers appear to bucking the trend according to the most recent CBI SME Trends Survey. This poll of 426 firms shows that domestic orders increased for the seventh quarter running, even though export orders were broadly flat. And domestic orders are expected to rise at a faster pace next quarter.
Small firms also continued to create more jobs in the three months to April, with the rate of growth above average. Employment in the sector is expected to grow strongly over the next quarter.
The key findings of the CBI report are:
- 23% of SME manufacturers said they were more optimistic, while 19% said they were less optimistic, giving a balance of +4%, down from +14% last quarter;
- 27% said their volume of output was up, and 22% said it was down, giving a rounded balance of +5%;
- 32% said their domestic orders were up, while 24% said they were down, giving a balance of +7%;
- 25% said export orders rose over the past three months, 28% said they fell, leaving a balance of -3%, the same result as the previous quarter.
SME worries about the negative impact of prices on exports rose to its highest level (59%) since July 2008. Even so, the findings show that small firms expect overall orders and output to rise further in the next quarter.
Katja Hall, CBI deputy director-general, said: "Smaller manufacturers are reporting solid increases in output, orders and jobs. However, prospects for exporting to the rest of Europe remain a concern. Sterling's recent rises against the Euro … makes it that bit tougher for British manufacturers to stay competitive and sell inside the Eurozone."