CBI survey reveals end of recession for SMEs

A new survey from the Confederation of British Industry (CBI) has revealed that small and medium-sized manufacturers have seen their first rise in business confidence for over a year.

The increase in confidence among small and medium-sized enterprises (SMEs) reflects the general pattern that all UK manufacturers are currently experiencing, according to the CBI. Thirty-three per cent of the SMEs responding to the survey said they were more optimistic about the general business situation, while 19% reported less confidence. Export optimism also reversed its negative trend, rising from a balance of minus 24% in January 2002 to stand at plus 8%.

The improvement in SME confidence is accompanied by expectations of a modest increase in orders and output over the next four months, but the year-long decline in orders and output has continued during the last quarter.

The volume of export orders has weakened, though by less than reported in January and by less than anticipated. Export orders are expected to rise over the next four months.

Profits remain under pressure and firms expect more job losses and a further reduction in spending on plant and machinery, but the CBI estimate that SME cutbacks will not be as severe as in recent surveys, and will be less severe than those anticipated by larger manufacturers.

Simon Bartley, Chair of the CBI's SME Council, commented: "The present business environment for smaller manufacturers is challenging, with orders and output still falling sharply. Fragile hopes for a prosperous SME future are yet to become a reality, with no sign yet of a return to job creation.

"Given the one per cent addition to employers' National Insurance contributions in the budget it is particularly important that the Bank of England does not stifle a potential SME recovery by raising interest rates prematurely." (CL)