Export Prospects Rise for British SMEs

Business optimism has edged higher for the UK’s small and medium-sized manufacturers according to the latest CBI Quarterly SME trends survey.

The survey of 423 firms reported sentiment regarding export prospects for the year ahead has risen strongly, total new orders edged up slightly in the three months to October, while output rose modestly, NewsNow reported.

Exports orders were flat on the quarter, but this marked the first time that they had not fallen since mid-2014. Robust growth in export orders is anticipated over the next three months, with expected growth the strongest since records began in October 1988.

But while optimism about export prospects over the year ahead grew strongly—at the fastest pace since April 2014—SME manufacturers reported that average unit costs at home are rising at the fastest pace since April 2013 and are expected to continue to increase over the next three months.

Numbers employed have grown for the fourteenth consecutive quarter, but at the slowest pace in almost two years. Headcount is expected to be flat over the next three months.

CBI chief economist Rain Newton-Smith, said: “Smaller manufacturers are increasingly confident about their export prospects in the months ahead as they continue to reap benefits from the weaker pound. But this is also leading to a rise in costs at home.

“While investment intentions have improved, uncertainty among businesses remains high, and so the government must prioritize measures to ensure that firms keep investing ahead, like removing new plant and machinery spending from business rate calculations.

“Setting the right environment for firms to innovate must be at the heart of the Autumn Statement, so the government should commit to a long-term target for R&D spending of 3% of GDP, getting behind Innovate UK and our catapult centers.”

British manufacturing output remained “on a firm footing” last month as the plunging pound boosted exports, but caused costs to rise at their fastest pace for nearly 25 years.

The closely watched Markit/CIPS UK Manufacturing purchasing managers’ index said output hit 54.3 in October, down from 55.5 in September, and below economists’ expectations of 54.4. A reading above 50 indicates growth.

Despite easing back from September’s two-year high, output was still well above the long-running average of 51.5.

The PMI report said sterling’s slump since the Brexit vote had helped manufacturers rake in more export orders from America, China and the EU.

However, it added that the currency weakness had also ramped up import prices and the cost of products linked to dollar-denominated commodities such as oil.