SMEs Enjoy Employment Boost As Manufacturing Bounces Back

Latest PMI Data Shows Improved Growth Across Sector

06.11.2014

Fergal Dowling, Partner | +44 (0)121 214 5476

SMEs in the UK manufacturing sector have been given a boost by the news that growth has picked up.

The latest Purchasing Managers Index (PMI), produced by Markit and the Chartered Institute of Procurement and Supply (CIPS), has been published for October and gave an improved reading of 53.2.
Not only does this indicate growth in the sector - as does any reading over 50 - but it was an improvement on the September figure of 51.5.

It was also above the historic third quarter average of 53 and represented the 20th successive month of growth in the sector.

Overall production rose for the 19th successive month, while the expansion of growth and incoming new business both hit three-month highs.

All this has been manifested in increased employment in the sector, but the release noted that this has been concentrated on SMEs, with payroll levels remaining static among larger firms.

Explaining these differing trends, CIPS group chief executive David Noble said: "The sector also experienced a rise in employment levels, especially in SMEs. As demand increased, so SMEs reacted to the changing landscape with a more agile response to developing employment capacity, whereas larger companies kept their staffing levels steady."

This phenomenon was also noted by Markit senior economist Rob Dobson, who commented: "Continued growth of employment, especially at SMEs, suggests that the recovery in the labour market is holding sway."

Mr Dobson also remarked that it has been "positive" to see the sector as a whole reverse its recent trend of slower growth.

SMEs have seen mixed fortunes in the past month depending on what sector they have been in.

The PMI reading for construction remained very strong at 61.4, but this represented the weakest figure in five months, falling from the previous month's 64.2 

Services also remained in positive territory at 56.2, but this was the lowest reading in 17 months, down from September's 58.7.

Chief economist at Markit Chris Williamson said the combined PMI data suggests overall economic growth will dip to 0.5 per cent for the final quarter of this year.

Expert Opinion
This is fantastic news for the manufacturing sector and it will be welcomed widely by small businesses involved in such work. It is particularly interesting to see how SMEs are increasingly willing to take on new staff in an effort to meet the demands of such growth.

"We would urge such businesses to carefully consider their recruitment to ensure they get the right people in to develop their talent pool and the skills at their disposal.

"They should particularly not go it alone when it comes to employment issues in general, as lawyers can provide expert advice on key aspects of regulation and how to ensure that a happy, engaged and motivated workforce is developed."
Fergal Dowling, Partner