Small Manufacturers Struggling Despite Growth

The UK’s manufacturing output rose for the first time in four months in September, but the outlook remains gloomy for small manufacturers, the Confederation of British Industry (CBI) has said.

The latest data from the Office for National Statistics found that factory production increased by 0.2 per cent, which was higher than the expected 0.1 per cent. In August, it fell by 0.3 per cent.

But the wider measure of industrial output, which includes mining and energy supply, saw no improvement, despite expectations of a 0.1 per cent rise.

The figures indicates that Britain’s manufacturing sector, which forms around 10 per cent of UK output, is still struggling due to weak demand in the UK and abroad.

The CBI said that business confidence among smaller manufacturers had recently shrunk back to levels not seen since the height of the recession two years ago.

Its latest quarterly SME Trends survey revealed that manufacturing businesses expected to see a drop in production over the coming quarter due to poor demand, while the number of firms looking to invest in new plant and machinery remained negative for the second quarter.

CBI SME Council chair Lucy Armstrong said small manufacturers in the UK had seen demand “flatlining” in the past three months, with “unexpected falls” in export orders.

However, British Chambers of Commerce  chief economist David Kern welcomed the ONS figures, calling them “reassuring” and “better than many had expected”.

Manufacturing association EEF economist Lee Hopley said there were “pockets of strength” across the manufacturing sector as a whole, but warned of a gloomy outlook ahead.

“With the turbulence in external markets showing no signs of abating we are likely to see continued uncertainty about the growth outlook in the months to come,”

she said.  Continuing export growth in the BRIC (Brazil, Russia, India, China) countries had helped boost September’s figures, but the Eurozone crisis was proving “disastrous” for demand, added EEF spokesman Mark Swift, with foreign companies placing large orders on hold until economic conditions improved.

“The forward indicators are not great,” he said. “You’d have to be naïve not to realise that next year could be very difficult indeed.”

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