CBI Survey Reveals Continued Growth In Sector

SMEs in the manufacturing sector have further cause for optimism after a new survey indicated that growth is continuing at a fast pace.

The Confederation of British Industry (CBI) Quarterly Industrial Trends Survey found that order book growth among the 481 companies it surveyed was even higher in the three months to the end of June than in the previous quarter, when it has been at a 19-year high, while domestic orders rose at the quickest pace since 1988. Employment also continued to rise swiftly.

One area in which the figures were not outstanding was exports, where orders were around the same as in the previous quarter. The number of firms that believed political or economic problems might limit exports was at its highest in five quarters.

However, the survey found firms believe the next three months will see an improvement in this area and their overall expectations for new orders are the strongest since 1977.

This has prompted firms to plan more investment, with spending intentions for plant and machinery at their highest since 1989 and the tally of firms seeking to expand capacity the most since 1979.

Commenting on the news, CBI deputy director Katja Hall remarked that the data painted a very attractive picture of the way the sector is going.

However, she noted, that the recovery is not free of risks. She said: "These include increasing international political instability and the recent rise in sterling, which could be weighing on exports.

"We need to continue to help manufacturers to export their products to high-growth markets across the globe, to give a healthy and sustainable boost to the UK's recovery."

The latest CBI data closely tallies with that produced by other surveys, such as the Purchasing Managers Index (PMI) published at the start of each month by Markit and the Chartered Institute of Purchasing and Supply. 

Their manufacturing PMI showed continued strong growth in the sector during June, with SMEs leading the way in a surge of new recruitment to a 39-month high.

It also showed new orders were arising at the fastest rate since the survey began in 1992.

Expert Opinion

These figures indicate that the manufacturing sector is believed to be in its strongest position for a number of years, which spells good news to businesses of all sizes. It will arguably be viewed most positively among small businesses, with such organisations often being in the best position to thrive when new opportunities arise. <br/> <br/>"However, it is vital that SMEs always ensure they take sensible steps when looking to take advantage of the growing confidence emerging in the sector, with the ultimate aim of ensuring they are in a good position to benefit in the future. Small firms do not often have the capabilities or resource to handle a range of factors, which is why external support can be so vital. <br/> <br/>"Central to this is legal advice from specialists who can guide them on a range of fundamental issues – including on employment law, real estate issues, finance and other key corporate concerns." Steven Beahan - Partner