SME optimism rises as latest quarter sees orders pick up

Rain Newton-Smith, CBI director of economics. Picture: contributed

The survey by the employers lobby group of 441 firms reported that total new orders and new domestic orders edged up slightly in the three months to April, even though export orders fell again.

But optimism about demand for exports over the year ahead also lifted for the second consecutive quarter, with small and medium sized businesses expressing greater confidence than larger firms.

Output was flat among SME manufacturers, in line with the rest of the manufacturing sector, following a quarter in which they outperformed the sector as a whole, the report said. Expectations for the quarter ahead remained strong.

Against this backcloth, investment intentions strengthened, with replacement and efficiency among the primary drivers of investment, while hiring intentions remain firm. However, concerns about skills shortages have picked up as a potential drag on output, the CBI said.

Rain Newton-Smith, CBI director for economics, said: “Higher spending on training is often a sign that skills shortages are biting again.

“This further underlines the need for business and government to work together in the coming months and make sure we get the design of the apprenticeship levy right, so it can deliver the quality skills training that firms need.”

Newton-Smith added that the fall in the value of sterling since the middle of last year was welcome to exporters as it makes the value of their goods sold abroad more competitive.

Among the key findings of the survey to April, 26 per cent of SMES said output was up, and 25 per cent said it was down, giving a positive net balance of +1 per cent.

A net balance of +17 per cent of companies expected output to increase in the coming three months. A total of 23 per cent of SMEs said they felt more optimistic, while 18 per cent were less optimistic on prospects, giving a positive balance of + 5 per cent.

A total of 17 per cent said export orders had risen in the three months to April, with 24 per cent saying they had fallen. This gave a negative balance of ‑8 per cent, a faster fall than the ‑4 per cent in the previous three months. However, a net balance of +23 per cent expected export orders to rise over the next three months.