Small Manufacturers Maintained Job Growth In July While Larger Firms Cut Back

SMEs in the UK manufacturing sector demonstrated a different pattern of employment to their larger counterparts in July, new data has shown.

The Purchasing Managers Index published by Markit and the Chartered Institute of Purchasing and Supply (CIPS) revealed that the rate of growth in the sector, while still above the long-term average, has slowed, with an August reading of 52.5, down from July's 54.8. This was the weakest growth since June last year.

Employment levels showed similar patterns, with job growth seen for the 16th successive month, but with this increasing at the slowest rate for 14 months. However, beneath this overall statistic was the finding that the number of people working for SMEs in the sector rose, whereas payrolls were "trimmed moderately at large-scale producers".

The outlook for the sector may have been dimmed by the difficulties in supplying some overseas markets.

Senior Markit economist Rob Dobson said the sector is not immune from "rising geopolitical and global market uncertainty", particularly in Europe as concerns remain over the eurozone and instability continues in Ukraine.

Both he and CIPS chief executive David Noble noted that while there was still growth in overseas orders, the bulk of this was from outside Europe.

Even so, SMEs have clearly responded to the broad situation by planning for the future, Mr Dobson observed.

He remarked: "Vitally however, manufacturers continue to anticipate growth for the foreseeable future, with SMEs in particular still hiring to catch up with one and a half years of consecutive output and new order growth."

The Manufacturing PMI is one of three to be released this week, with construction and services also due. Together, they will give a snapshot of economic health and it is anticipated the latest figures will continue to show growth.

A number of recent economic forecasts have suggested SMEs and other firms across the economy will continue to raise staff levels.

These include the British Chambers of Commerce forecast for the coming years, which predicts joblessness will drop to 5.5 per cent in the second quarter of 2015.

Expert Opinion

It is interesting to see SME manufacturers continuing to look to boost their recruitment and hiring, which highlights a strong desire to take advantage of the improving economy and look to compete with larger organisations in the sector. <br/> <br/>"While such plans are welcome, it is important to remember that growing pains are a regular part of developing a business. <br/> <br/>"As a result, SMEs need to put plans in place to ensure they are prepared for all of the challenges which can emerge from expanding operations – this includes having the right employment law processes in place to ensure new recruits are quickly adapted and integrated into the business." Fergal Dowling - Partner