By Daniel Hunter

The growth of small and medium-sized enterprises (SMEs) in the manufacturing sector continued steadily in the second quarter, but exports are still dragging down overall performance, according to the CBI.

The latest CBI SME Trends Survey found steady growth in new domestic orders over the quarter and a rise in output in line with expectations. Business optimism also improved a little further in the three months to July.
But new export orders fell, having been broadly flat for the previous two quarters. Export prices continued their downward trend, falling at the fastest pace since October 2003, and are widely expected to limit export orders in the next quarter.

Looking ahead, growth in output and total and domestic orders is expected to gather pace, whereas exports look set to fall again in the three months to October.

Average unit costs fell a little for the first time since 1999, with domestic prices staying broadly flat. More jobs were added in the three months to July, and employment growth is projected to continue through to October.

Anna Leach, CBI Head of Economic Analysis, said: “Optimism among smaller manufacturers improved this quarter, alongside steady employment growth, rising output and new domestic orders.

“But the relative strength of the Pound against the Euro is hitting export orders and margins. This, alongside uncertainty regarding Greece, threatens growth prospects in the Eurozone.”