The scale of the UK’s present economic challenges has been further illustrated by the results of a new survey covering the three months to October 2022.

The research in question was the SME Trends Survey of the Confederation of British Industry (CBI), for which some 262 small and medium-sized manufacturing businesses were quizzed.

It emerged from this work that business optimism in the UK’s SME manufacturing sector has now fallen for four quarters in a row, with output and the volume of new orders also recording a decline for the last three months.

Ominous signs of a toughening business climate

Not only did the latest survey see firms reporting a decrease in both new orders and output volumes over the quarter just gone, but they also anticipated output dropping further in the coming three months.

As for what exactly was the likeliest factor to affect output over the next quarter, the most frequently cited one among the respondents was the level of orders, although many of those surveyed also worried about their ability to access the right skills.

Cost growth and price growth did both slow slightly over the three months to October. However, these measures were both still exceptionally high by long-term standards, and the questioned SMEs expected the rates of cost and price growth to be similarly strong over the next quarter.

The probable knock-on effect of this bleaker outlook for the recruitment and investment intentions of such firms is clear. While the quarter to October did see an increase in the number of people employed, it was the slowest rise recorded since April last year – and it is expected that the next three months will see a further, merely modest increase.

There was also evidence in the survey findings of SMEs having cut back on their previous intentions for capital spending. It is anticipated that investment in buildings and new plant and machinery will fall over the coming 12 months, compared to the situation during the 12 months just gone.

“Firms need decisive action from government”

CBI Lead Economist Ben Jones said of the latest survey results: “SMEs face continued challenges in the form of skills shortages, high costs and shrinking order books, which are weighing heavily on investment plans.

“Firms need decisive action from the government to calm markets, help support small businesses through a difficult few months ahead, and build confidence in a rapid economic recovery.

“This should include much-needed reforms to business rates and the Apprenticeship Levy. That will encourage renewed investment and create the flexibility needed to future-proof the UK’s workforce.”

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