Order pressures for UK's small firms

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Small businesses are coming under increasing pressure from a downturn in new orders

Small businesses across the UK have come under increasing pressure during recent months due to an ongoing decline in both domestic new orders and overseas exports.

The latest SME Trends Survey from the Confederation of British Industry (CBI) has revealed export orders declined at their fastest pace since 2009 in the three months to the start of October this year, while quarterly domestic orders diminished for the first time in more than two years.

Overall, business optimism within the small to medium-sized enterprises segment fell for the first time since January 2013, while the majority of firms now no longer expect to increase their levels of expenditure on product and process innovation in the year ahead.

The key findings of the report included:

  • A -11 per cent balance for manufacturers highlighting an increase in orders for the three-month period.
  • A -8 per cent balance between firms that stated they are optimistic concerning the present business situation (22 per cent expect improvements in the coming months, compared to 30 per cent that expect the situation to worsen).
  • Average unit costs remained largely flat (up two per cent) in terms of costs for manufacturers.
  • Export prices continued to fall - down 16 per cent on average in comparison to the same time last year - with expectations that this decline will continue into the coming quarter.

CBI director of economics Rain Newton-Smith said: "As demand has fallen, especially in the face of a strengthening pound, our smaller manufacturers have had a tough quarter, with orders and output volumes dropping.

"Manufacturers expect conditions to stabilise somewhat over the quarter ahead, but remain concerned about the outlook for demand.

"Innovation and technology are crucial to driving productivity, and that’s why it's vital the government uses the Comprehensive Spending Review to prioritise spending that supports skills and innovation, spurring a revival in productivity growth in the UK."

Overall, the CBI expects a tough few months ahead for the UK's small businesses, although the new year could deliver some respite from the present pessimism surrounding many firms and their forward-looking expectations.