Export orders could provide much-needed boost for SME manufacturers

Of the 480 small and medium-sized firms surveyed, 51% saw the volume of total new orders fall in the three months to July, while 17% reported a rise. The resulting balance of -34% is an improvement on the previous quarter's balance of -51%, which was the worst figure since the survey began in 1988. Manufacturing output continued to fall, with 43% of firms reporting a decline and 15% saying it rose, giving a balance of -28%. This marked a slower rate of decline than the previous quarter's survey low of -48%. Looking ahead to the next quarter, expectations for total new orders and output remain negative, but medium-sized companies are predicting an export-led bounce in orders and output. Firms are the most optimistic about export prospects since April 2007(a balance of 5%), and medium-sized companies expect the volume of export orders to rise in the next quarter (a balance of 27%). This would push the volume of total orders for medium-sized firms into positive territory (a balance of 10%). Russel Griggs, chairman of the CBI's SME Council, said: "Business conditions remain difficult for the UK's small and medium-sized manufacturers. Orders and output are still falling, but things aren't quite as gloomy as they were three months ago. "So far, the relative weakness of sterling has not provided firms with much of an export boost. It is therefore encouraging that medium-sized companies are hopeful overseas orders will pick up in the next quar ter, helping raise total orders and output. Medium-sized firms are also benefiting from improved access to credit, unlike smaller companies which tend to have fewer funding options available to them. "The outlook for medium-sized firms looks positive, but it is still too early to say whether export-led growth will deliver a platform for sustained recovery. It is unclear when a return to growth for smaller firms will come, and it is worrying that credit constraints remain a concern. However, we hope these will loosen over the coming months as the flow of finance to SMEs increases."