Small firms see orders and output continue to fall

SMEs saw domestic and export orders continue to fall in the three months to January, while production also contracted for the third consecutive quarter, according to the Chartered Business Institute’s (CBI) lastest quarterly SME Trends Survey. However, both domestic orders and output are expected to increase in the coming three months.

The Survey, which had 347 respondents, showed that total new orders fell slightly (- five percent), for the second quarter running. This was driven by falls in both domestic orders (- six percent) and export orders (- nine percent), although both declined at a slower pace than the previous quarter (domestic orders by -11 percent, and exports orders by -21 percent).

However, SMEs expect total new orders to grow over the next three months (+ nine percent), likely to be driven by anticipated growth in domestic orders (+10 percent), in contrast, export demand is expected to be broadly flat (- two percent).

In line with falling demand this quarter, output continued to fall (- eight percent), failing to meet expectations of modest growth (+ five percent). However, once again, production is expected to increase next quarter (+ seven percent).

With less activity over the last three months, numbers employed in the sector fell slightly (- four percent), for the first time in three years. But SMEs anticipate an increase in headcount in the next quarter (+11 percent).

Anna Leach, CBI Head of Economic Analysis, says that activity has continued to contract this quarter, with falling production disappointing growth expectations:

“Nonetheless, better news on the domestic front is expected, with output and domestic orders set to rise modestly. But there is little sign of improvement in export prospects, and uncertainty over demand continues to weigh on investment plans.”

SMEs remain concerned about export prospects for the year ahead with optimism falling significantly (-22 percent), at the fastest pace since April 2009 (-32 percent).

However, sentiment overall deteriorated at a slower pace: a balance of – six percent said they were less optimistic regarding the business situation in the three months to January, with the rate of decline easing compared with the previous two quarters (July -13 percent, October -12 percent).