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Business optimism drops for small and medium-sized firms

Published 03/08/2016

This marks the gloomiest outlook for smaller firms since 2009
This marks the gloomiest outlook for smaller firms since 2009

Britain's small and medium-sized manufacturers have cast a gloomy outlook over growth after business optimism fell at its fastest pace since January 2009, a report said.

The Confederation of British Industry's quarterly SME trends survey said heightened uncertainty surrounding the Brexit vote triggered a sharp fall in optimism despite the volume of output rising in the three months to July.

It found that 8% of firms said they were more optimistic over the period, while 53% said they were less optimistic, leaving a balance of minus 44%.

It added that 27% of businesses reported volume output was up over the period, while 20% said it was down, with a balance of plus 6%.

The study, collated from the responses of 472 companies, also found that plans for fresh investment in buildings, plant and machinery had been scaled back.

Rain Newton-Smith, CBI director for economics, said: "The UK's SME manufacturers reported higher production, more staff hired and now expect to sell more of their world-class goods overseas over the next quarter, with a weaker sterling having a hand in this.

"But overall they do feel less optimistic and are scaling back some investment plans in machinery and plants."

It comes after the latest PMI survey for Britain's manufacturing industry showed the sector had slumped to its lowest level for more than three years, hitting 48.2 in July, down from 52.4 the month before, as it counted the cost of Britain's decision to ditch the EU.

A string of reports pointing to a lacklustre performance from the UK economy has sharpened the focus on this Thursday's interest rate announcement, with many economists expecting the Bank of England to cut the cost of borrowing and increase quantitative easing in a bid to shore up economic growth.

Ms Newton-Smith added: "Naturally, much of the concern is related to uncertainty and business wants to now see the new Government deliver a clear plan and timetable for the EU negotiations ahead, while cracking on with immediate domestic priorities, including a decision on new aviation capacity in the South East, which will help the UK's SME manufacturers to reach new markets in the future."

A Department for Business, Energy and Industrial Strategy spokesman said: "The UK is a growing hub for enterprise, and our record number of small businesses have a key role to play in our comprehensive industrial strategy.

"This Government is determined to make sure small firms benefit from the opportunities presented by leaving the EU and have the confidence needed to plan for the future.

"Our long term commitments to cut red tape, encourage entrepreneurship and appoint a small business commissioner will ensure the UK remains the best place in Europe to start and grow a business."

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