CBI: Optimism on the rise among UK SMEs

3rd May 2016

Business conditions for small and medium-sized enterprises (SMEs) across the UK have stabilised in the last quarter, according to the latest Quarterly SME trends survey from the Confederation of British Industry (CBI).

The survey of 441 small firms found that new orders and new domestic orders had grown somewhat in the three months to April, but export orders declined yet again.

However, optimism about export demand for the rest of the year increased for a second successive quarter, with SMEs expressing greater confidence than larger businesses.

More than a quarter (26 per cent) of SMEs surveyed said their volume of output was up, but 25 per cent said it was down, resulting in an overall balance of one per cent.

Within that output, almost a third (30 per cent) of SMEs said their domestic orders were up, while only 24 per cent said they were down, resulting in an overall balance of five per cent. However, businesses still expect a slight strengthening in order growth during the next quarter to seven per cent.

SME investment intentions are also promising, with replacement and efficiency among the key drivers of investment, while hiring intentions remain strong.

Plans for capital spending on plant and machinery were up to a balance of +5 compared with -10 in the previous quarter, while investment in product and process innovation is expected to grow at a steady pace of +9, as is spending on training and retraining (+26).

However, investment in buildings is expected fall in the next quarter to a balance of -18, down from a balance of -6 in the previous quarter.

Rain Newton-Smith, director for economics, CBI, said: “Higher spending on training is often a sign that skills shortages are biting again.

“This further underlines the need for business and government to work together in the coming months and make sure we get the design of the apprenticeship levy right, so it can deliver the quality skills training that firms need.

“While the depreciation of the Pound since mid-2015 will be welcomed by exporters, the Government could and should do more to help by establishing an exports commission that can look at the challenges and opportunities for exporters more closely.”

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