Fearful SMEs

Higher oil and energy prices have combined with falling demand and stagnating prices to make life tough for small and medium-sized manufacturers – and firms fear worse is yet to come.

Trading conditions have deteriorated in each quarter of 2005 and the latest CBI SME Trends Survey, shows that just one firm in eight (12 per cent) is more optimistic about the business outlook than in July. One in three (36 per cent) are more pessimistic.

In the three months to October, output fell for the third quarter in a row with just 20 per cent of small and medium-sized manufacturers increasing production compared to 35 per cent who saw it fall, a balance of minus 15 per cent. Two thirds of firms (63 per cent) are operating at less than full capacity.

Falling output, allied to higher oil and energy prices, pushed up average unit costs - a balance of 29 per cent of firms reported an increase in the last quarter. This was despite employers shedding staff - cutting the wage bill - for the fifth successive quarter.