Belfast Telegraph

Saturday 20 December 2014

Demand falls for SME manufacturing again

Demand continues to fall for small and medium-sized (SME) manufacturers

The last three months have seen activity for small and medium-sized (SME) manufacturers contract as demand continues to tail off, according to industry organisation the CBI.

Its SME Trends survey revealed that companies in the UK sector have been hit by contracting demand from both domestic and export customers.

That’s meant that output from SME manufacturers also fell for the fourth consectutive quarter although most companies surveyed expect output to pick up in the coming months as exports increase.

Stephen Gifford, CBI Director of Economics, said challenges remain in the sector, although there is hope.

“It’s been another disappointing quarter for small and medium-sized manufacturing firms, who have seen new orders and output continue to fall,” he said. “Nonetheless, firms do expect to raise output a little in the coming three months. The recent weakening in sterling will have boosted the competitiveness of the UK’s smaller manufacturing firms, with a strong pick-up in export orders predicted.”

The data comes just days after the chief executive of Ulster Bank parent RBS said the bank is desperate to lend but a lack of confidence amongst businesses means it’s sitting on a cash pile.

Stephen Hestor told the Sunday Times at the weekend the bank has £20bn of available finance and “deposits coming out our ears”.

“That’s £20bn before we draw on any resources from anywhere else in the bank — £20bn of surplus deposits to put to work in the UK to support growth, whenever growth arrives.”

He said the bank “can’t force companies to borrow” but blamed a lack of confidence in the business community on the lack of appetite for finance.

Mr Hestor’s comments are at odds with the CBI’s report.

Of the SME manufacturers surveyed, 12% said that a lack of available external finance would constrain capital spending in the year ahead, its |highest level since October 2010.

But Mr Hestor remained adamant that it is struggling find enough companies wanting to borrow.

The part-state owned bank is said to be about to launch a commitment to increase its lending to businesses by 10% a year.

Late last week RBS reported a return to profits in the first three months of the year while Ulster Bank recorded another loss, albeit much reduced from the same time last year.

A reduction in impairment charges — money set aside to protect against bad property debt — reduced the bank’s operating loss for the first quarter to £164m from £310m in 2012.

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