Page 6 - Industrial Technology February 2020
P. 6


                                                 SME optimism up,

                                                 but activity subdued

                                                 OPTIMISM IS UP AMONG UK MANUFACTURERS, BUT SCRATCH BELOW
                                                 THE SURFACE OF THE DATA AND BUSINESSES ARE STILL STRUGGLING

                                                        CBI  survey  of  279  SME  manufacturers  has  more  optimistic  regarding  their  business  situation,  while
                                                        reported  that  optimism  about  the  business  14%  said  they  were  less  optimistic,  giving  a  rounded.
                                                        situation  rose  at  the  strongest  pace  since  April  Some 22% of firms said output increased and 29% said it
                                                 A2014  in  the  quarter  to  January.  The  upward  decreased,  giving  a  rounded  balance  of  -7%.  Growth  is
                                                 swing in growth from the previous quarter was the largest  expected  to  rally  next  quarter  (+18%).  30%  of  firms
                                                 improvement in optimism in a single quarter in the survey’s  reported  an  increase  in  total  new  orders,  and  38%  said
                                                 history  (since  October  1988).  Optimism  about  export  they  decreased,  giving  a  rounded  balance  of  -7%.  New
                                                 prospects also rose for the first time since July 2018.  orders  are  expected  to  rise  (+18%)  over  the  coming
                                                    However,  output  volumes  and  domestic  orders  fell  in  quarter.
                                                 the three months to January, while export orders were flat.  Looking  at  the  domestic  picture,  28%  of  firms  said
                                                 But output and domestic orders are expected to grow in the  orders  increased  and  35%  said  they  decreased,  giving  a
                                                 quarter ahead. Chiming with the weak activity this quarter,  balance of -7% (from -12% in October 2019). Domestic
                                                 numbers employed fell (at a similar pace to the previous  orders are expected to grow (+14%) over the next three
                                                 three months) and are expected to remain flat in the next  months. 23% of firms reported an increase in export orders
                                                 quarter.                                   and 23% said they fell, giving a rounded balance of -1%.
                                                    Investment  intentions  for  the  year  ahead  improved  Firms  anticipate  export  orders  will  remain  broadly  flat
                                                 across the board. Spending plans for buildings, plant and  (+1%) next quarter.
                                                 machinery,  and  product  and  process  innovation  all  rose  Numbers employed continued to fall, with 13% of firms
                                                 above their long-run averages, though point to only flat or  saying they had seen growth in headcount and 20% saying
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    downshift.                                   slightly higher capital spending in the next twelve months.  they had seen a reduction, giving a rounded balance of -8%
                                                 Furthermore, SME manufacturers still expect to cut back on  (from  -5%  in  the  three  months  to  October).  SME                         investment  in  training  and  retraining,  where  investment  manufacturers’ investment plans for buildings (-3%), plant
                                                 plans remain below historic norms. Labour shortages rose  and machinery (+1%) and product and process innovation
                                                 further as a cited constraint on capital spending, reaching  (+6%) all rose above their long-run averages (-17%, -7%
                                                 another survey high.                       and +8% respectively).
          NEW                                       Alpesh Paleja, CBI lead economist, said: “It’s brilliant  Average  domestic  prices  were  flat  (+1%)  and  export
                                                 the  UK’s  small  and  medium-sized  manufacturers  are  prices fell (-11%), but both are expected to rise in the next
                                                 feeling  markedly  more  optimistic  about  the  business  quarter (+11% and +18% respectively).
                                                 outlook,  with  the  outlook  for  activity  and  investment  Tom Crotty, group director at INEOS and chair of the
                                                 looking more hopeful too. But scratch the surface, and it  CBI Manufacturing Council, said: “The boost to optimism
                                                 seems  that  SME  manufacturers  are  still  struggling.  This  in the manufacturing sector is very encouraging given the
          NEU                                    continues  the  theme  seen  across  the  recent  swathe  of  difficult  environment  that  firms  have  faced  in  recent
                                                                                            months. However, it is clear that the sector is not yet out of
                                                 economic  data:  sentiment  and  expectations  clearly
                                                 improving, but little sign of it feeding through to activity.  the woods in terms of performance, which means that this
                                                    “Furthermore, businesses are still grappling with longer-  optimism  could  prove  to  be  short-lived  unless  the
                                                 term  uncertainty  around  the  end  state  of  Brexit.  It’s  the  government  use  their  newfound  strength  to  help  address
                                                 vital the Government works quickly to secure a good trade  underlying issues holding back manufacturers.
                                                 deal with the European Union: one that shores up British  “Manufacturers are ready to work with the government
                                                 manufacturers, protects jobs and allows industry to grow.”  to make real progress on key domestic challenges such as
                                                    Looking at the key findings in details, 45% of small and  increasing  productivity,  addressing  skills  shortages,
                                                 medium  enterprise  (SME)  manufacturers  said  they  were  improving sustainability and tackling climate change.”

           WE CREATE MOTION                                                                        INDUSTRIAL TECHNOLOGY • February 2020
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