Political and economic uncertainty stifling SMEs

In the last three months of 2011 the strength of SME’s in the UK fell. Political and economic uncertainty meant that the number of orders fell off and output had stagnated. This information is according to the CBI which recently conducted a survey of over 300 businesses. It shows that the confidence in this part of the market is the lowest it has been since early 2010 and production is expected to remain rather flat for the next three months.

One of the biggest falls was in domestic orders which shrank by nearly 20 percent and export orders also fell significantly by around 10 percent. These are the biggest drops that has been seen since late 2009. Many firms are expecting the demand will continue to fall over the next few months but it is expected that orders going to export markets will eventually stabilise.

The survey has highlighted how small and medium-sized enterprises are becoming concerned over economic and political conditions. One in every three firms have said that in the next three months their orders to export markets are going to be limited.

The manufacturing sector is also experiencing fragile conditions which are preying on confidences. General sales fell by around 20 percent compared with three months previous and prospects about export also fell.

The chair of the small and medium-sized enterprise Council for CBI is Lucy Armstrong who commented, “Concerns over the Eurozone crisis have led the sentiment in business to fall very sharply in the three final months of last year. It seems that in the next three months we’ll be seeing a certain amount of stabilisation but the manufacturing sector is still looking rather bleak.”

Cost inflation has slowed in the past quarter but output inflation has come to a standstill for both export and domestic prices. The CBI survey has shown that there is relatively little improvement on the negative sentiment that has been seen in the SME sector recently.