Confidence grows among small and medium businesses, says CBI

Optimism is on the rise among small and medium businesses (SME) in the UK, with exports expected to provide a boost in the immediate future, according to an industry survey published on Tuesday (1 November).

The latest quarterly SME trends survey released by the Confederation for British Industry (CBI), showed one in four firms were more optimistic about the outlook, with just one in five expressing more pessimism over the future of British economy.

Exports orders were flat on the quarter, the first time they have not fallen since mid-2014 and, due to the weakening pound, exports are expected to record the strongest quarterly growth since records began in 1988.

"Smaller manufacturers are increasingly confident about their export prospects in the months ahead as they continue to reap benefits from the weaker pound.

"But this is also leading to a rise in costs at home," said CBI chief-economist Rain Newton-Smith

"While investment intentions have improved, uncertainty among businesses remains high, and so the Government must prioritise measures to ensure that firms keep investing ahead."

The report added that a third of the 423 companies surveyed reported an increase in volume in the three month-period, while just over one in five registered a decline, resulting in a +10% balance. Meanwhile, one in three firms reported an increase in total orders in three months to the end of October, while just over a quarter reported a decline, for a balance of +4%.

Numbers employed have grown for the fourteenth consecutive quarter, but at the slowest pace in almost two years, CBI said, adding that headcount is expected to be flat over the next three months. Crucially, however, following a deterioration in the wake of the Britain's European Union referendum, investment intentions have improved.

However, the report warned that concerns over labour shortages limiting capital spending have risen, to levels similar to those seen at the end of 2007. Newton-Smith added that the Chancellor Philip Hammond will be under pressure to strike the right tone in the upcoming Autumn Statement.

"Setting the right environment for firms to innovate must be at the heart of the Autumn Statement," she said.

"The Government should commit to a long-term target for research and development spending of 3% of GDP."