Confidence declines for small UK manufacturers

Britain's smaller manufacturers are reworking their business plans in the face of an increasingly gloomy economic outlook, according to a closely watched survey published this morning.

The latest quarterly SME Trends Survey from the Confederation of British Industry (CBI) records the first marked decline in confidence for two years as the number of companies who report less optimism than three months ago exceeds the number who are more positive by 10 points.

Although total orders continued to rise strongly, with a positive balance of 19 per cent in the three months to July, and factory output rose by 12 per cent, above the long term average, companies do not expect the growth to continue. The prediction is that both orders and production will remain flat over the coming quarter, prompting companies to rethink business plans put together in more optimistic times.

"Manufacturers are reassessing their business plans," said Lucy Armstrong, the chair of the CBI's SME Council. "They do not expect to take on any more staff in the next three months and intend to invest less inthe year."

The downbeat CBI report comes after a slew of warnings over the fragility of Britain's economic recovery. The most recent GDP figures recorded a woeful 0.2 per cent growth in the second quarter and the International Monetary Fund predicted a "bumpy and uneven recovery" for the UK.