Small UK manufacturers swamped with orders

| May 4, 2011
Small UK manufacturers swamped with orders

The UKa��s small and medium-sized manufacturers have seen the volume of orders at home and abroad grow at the fastest rate in 16 years, according to the latest Confederation of British Industry (CBI) SME Trends Survey.

Headcount increased for the third consecutive quarter as firms tried to keep up with demand, and output is expected to rise again in the coming months.

However, the CBI warns that smaller firms are being squeezed by intense cost pressures.

Alongside strong growth, production costs have increased rapidly, weighing on profit margins, with the majority of firms surveyed reporting that unit costs are accelerating from already strong increases over the past year.

The trend has resulted in sharp price rises, with export prices increasing at the sharpest rate since the CBI’s survey began in October 1988.

The body’s SME council chair, Lucy Armstrong, says: a�?”Inflationary pressures remain a dark cloud, with rising oil and commodity prices pushing up the cost of production and eating into profit margins.”

She adds: “Inflationary pressures show no sign of easing in the coming quarter, with firms expecting unit costs to increase sharply again.”

Looking ahead, firms expect demand to continue to strengthen in the next quarter, though at a slower rate.

The research also reveals evidence of tightening capacity pressures but investment intentions are generally strong for the year ahead, with small manufacturers planning to spend more on plant and machinery, product & process innovation, and training and re-retraining.

The April 2011 SME Trends Survey was conducted between 23rd March 2011 and 11th April 2011; 414 SME manufacturing firms replied.

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