Small firms' outlook remains gloomy

Clifford German
Sunday 23 October 2011 07:45

LAST WEEK'S half-point cut in interest rates came too late to prevent business confidence among small and medium-sized firms plunging to its worst level since January 1991, according to a new survey from the Confederation of British Industry.

The quarterly CBI survey showed that 59 per cent of the small and medium- sized businesses questioned were more pessimistic than four months earlier. Only 6 per cent were more optimistic, a negative balance of 53 per cent. This compared with minus 46 per cent in July and minus 3 per cent a year ago.

Employment, output and investment plans have all fallen sharply. Output is expected to decline further in the next four months, with medium-sized firms the most pessimistic.

Employment has fallen at its fastest rate for five years. Over the next four months only 10 per cent of firms expect to create jobs and 39 per cent expect to cut back, a negative balance of 29 per cent.

Total orders also fell at their fastest rate since 1991, with only 15 per cent reporting a rise and 53 per cent a fall. Export orders are expected to continue falling, although there are signs that the recent fall in sterling to around 2.75 Deutschmark has eased the pressure of competition.

Colin Perry, chairman of the CBI's small and medium manufacturers' council, said: "This really is another gloomy picture. We hope to see further rate cuts to reduce the depth and length of the manufacturing downturn."

Separately, a survey published today by the Department of Trade and Industry claims that the best UK companies are putting as much into capital investment as their foreign rivals, but that the average UK company spend is below international levels. The first issue of the department's new Capex Scoreboard ranks 500 UK companies and compares them with 300 international companies.

The scoreboard shows that the top UK companies have around two-thirds the level of capital expenditure per employee of their rivals. But UK oil companies are spending more than foreign competitors.

Firms in food retailing and pharmaceuticals are close to international levels, but the general manufacturing sector lags behind. The top 300 international companies include 36 based in the UK, fewer than the US and Japan but more than any other nation.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

View comments