Rise in demand for smaller manufacturers

Small and medium-sized manufacturers have seen the volume of domestic and international orders grow at the fastest rate in 16 years, research shows.


Small and medium-sized manufacturers have seen the volume of domestic and international orders grow at the fastest rate in 16 years, research shows.

Small and medium-sized manufacturers have seen the volume of domestic and international orders grow at the fastest rate in 16 years, research shows.

However, the Confederation of British Industry (CBI), which has released the data, says the rise has been coupled with intense cost pressures on smaller businesses that are being squeezed by a cut in margins.
 
The SME Trends Survey reveals that volumes of domestic and export orders among smaller companies rose at the fastest rate since April 1995. A survey of 414 businesses, which have less than 500 employees, finds 39 per cent report a rise in the volume of domestic orders in the three months to April this year, and 23 per cent a fall, giving a balance of +16 per cent.

For export orders, 37 per cent say volumes have increased, while 14 per cent say they declined, giving a balance of +23 per cent.

But alongside strong growth, production costs have increased rapidly, weighing on profit margins, the CBI has found.

A balance of +53 per cent of businesses say average unit costs rose, the highest since October 2008 (+53 per cent) with the rate of growth accelerating from already strong increases over the past year. That led to sharp rises in average domestic prices (+26 per cent) and export prices (+31 per cent), which are both in line with expectations.

Domestic prices rose at the fastest rate since April 1995 (+32 per cent), and export prices at the sharpest rate since the survey began in October 1988.

CBI SME council chair Lucy Armstrong comments, ‘Smaller manufacturers are enjoying strong demand for goods at home and abroad, underpinning robust growth in production. Headcount has increased for the third consecutive quarter as firms try to keep up with demand, and output is expected to rise again in the coming months.

‘However, inflationary pressures remain a dark cloud, with rising oil and commodity prices pushing up the cost of production and eating into profit margins. Manufacturers have raised output prices rapidly to cope, and expect to continue doing so over the next quarter.’

Todd Cardy

Adelbert Swaniawski

Todd was Editor of GrowthBusiness.co.uk between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital. Connect with...

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