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News - 13 May 2011

SMEs see fastest rate of growth in 16 years

Domestic and export orders amongst the UK's small and medium-sized manufacturers have grown at their fastest rate in 16 years, according to the latest quarterly SME Trends Survey from the Confederation of British Industry (CBI). Strong demand at home and abroad, coupled with stock rebuilding, has helped push up output amongst smaller firms.

A balance of +18% of firms said production rose, compared with +13% in the previous quarter. It means that demand has been growing at the fastest rate since April 1995.

With demand and output rising, a balance of +16% of firms increased their headcount, the fastest rate since January 1995 (+17%).

Lucy Armstrong, Chair of the CBI’s SME Council, said:

“Smaller manufacturers are enjoying strong demand for goods at home and abroad, underpinning robust growth in production.

“Headcount has increased for the third consecutive quarter as firms try to keep up with demand, and output is expected to rise again in the coming months.

Investment intentions are generally strong for the year ahead, and firms plan to spend more on plant and machinery (+10%), product & process innovation (+19%) and training and re-retraining (+10%).

Overall, a net 12% of firms are more optimistic about the general business situation compared to three months ago (+3%).

There was, however, a cautionary note, with rising oil and commodity prices pushing up the cost of production and eating into profit margins.

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