Domestic and export orders are rising for small firms

Over the past three months, the volume of small- and medium-sized manufacturers’ total new orders rose by 8% – with faster growth of 27% predicted over the next three months, by the CBI’s quarterly SME Trends survey.

The survey said this was driven by upturns in domestic growth of more than 22% and export orders, which showed plus 23% growth.

Output was broadly flat for the second quarter running but is expected to increase by 19% in the next three months.

However, the CBI warned: “Although SMEs expect export orders to rise, concern about political and economic conditions limiting export demand has continued to pick up.”​

Angela Coleshill, FDF’s director of competitiveness, told FoodManufacture.co.uk: “FDF members have reported similar trends to the CBI’s SME Trends survey.​

Optimism​

“The latest FDF Business Confidence survey covering Q1 2012 shows a positive balance of change for optimism (more than 22%) for the first time since the survey began back in 2010.”  ​

Coleshill added: “Output dipped slightly in Q1​ [the first quarter], which is normal following the Christmas period. However, in Q2​ [the second quarter] members expect both domestic and export sales to increase substantially.  ​

“There is a feeling throughout the food and drink industry that the health of the UK economy hit a low in Q1 and business conditions are now beginning to improve.”​

The UK food and drink industry has proved resilient in recent times as Office for National Statistics results showed that it outperformed all manufacturing sectors in 2011 in terms of output.

Over the past two years food and drink producers have maintained the most consistently stable levels of production of all the manufacturing sectors, according to the FDF.

It attributes this stability to success in increasing exports, maintaining demand levels throughout the economic crisis and diversity of products.

Engine room of growth​

SME food and drink manufacturers have been described as the “engine room of growth that will lead the UK economic recovery” ​by Caroline Spelman, secretary of state for the Department for Environment, Food and Rural Affairs (DEFRA).

Food and drink is the largest manufacturing sector in the UK with a turnover of £72.3bn. More than 90% of food and drink manufacturers are classified as SMEs.

However, the FDF has previously highlighted obstacles to growth, such as lack of access to finance with some manufacturers with new contracts unable to secure bank lending.

There have also been concerns over “excessive” ​legislation, such as calls for employment law to be simplified, as SMEs rely on access to a skilled workforce and need flexibility in the market-place – including access to migrant labour.

Indications that such issues are being addressed include the National Loan Guarantee Scheme, which was announced in March to help businesses access cheaper finance by reducing the cost of bank loans.

The CBI told FoodManufacture.co.uk that it does not breakdown figures by sector in its survey, which had 356 respondents.

Meanwhile, Prime Minister David Cameron highlighted the role of SMEs in contributing to economic recovery during a visit to a tractor factory in Essex earlier this week (May 8).  

“Our job is to build a recovery on real growth and investment – not debt,”​ he said. Part of that recovery depended on government “… helping small businesses and freeing them from the mass of unnecessary bureaucracy that too often stifles enterprise and entrepreneurship”,​ said Cameron.

To watch our exclusive video interview with Jim Paice, agriculture minister, about the contribution of food and drink exports, click here​.