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Peer2Peer Finance News | September 25, 2017

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UK SME manufacturers hit six-year export order high

UK SME manufacturers hit six-year export order high
Anna Brunetti

UK SMALL- and medium-sized enterprise (SME) manufacturers are going full steam ahead, posting their highest level of export orders and output growth in six years, new research shows.

International orders surged by 20 per cent in the three months to April, the fastest pace since April 2011. This was followed by a 19 per cent jump in domestic demand, the strongest result since October 2013, a survey by the Confederation of British Industry (CBI) unveiled on Friday.

Total orders were at their highest level in three years.

SME manufacturers across the country have been on a hiring spree, with 34 per cent of the 373 respondents adding new members to their team over the period, which represents another three-year high.

Read more: UK SMEs bullish on growth despite political woes

The sector’s optimism about the current business climate surged at its fastest pace in almost three years, the association said, with sentiment on exports over the next year climbing by a record 34 per cent from three months earlier.

However, the survey also showed that mounting inflationary pressure on business costs cast a shadow over the new order bonanza.

“The UK’s SME manufacturers have hit a purple patch, with strong domestic and export demand driving a firm rise in output,” said CBI economist Alpesh Paleja.

“But costs and prices have continued to climb, with little sign of let up over the next quarter. This is putting considerable pressure on manufacturers’ margins, and so we’re likely to see further pass-through to consumer prices ahead.”

Read more: SMEs feel the pinch as inflation soars

SME manufacturers’ average domestic and export prices and average unit costs grew at the fastest rate in six years, by 26, 28 and 38 per cent respectively, putting a dangerous strain on their future growth and investment plans for the year ahead.

The respondents said they are planning to cut spending on buildings by 15 per cent and investment in plant and machinery by 10 per cent over the next 12 months, the research revealed.

Read more: RateSetter targets growth in SME lending