New orders for SME manufacturers hit a three-year high in the three months to April, according to new figures from the Confederation of British Industry (CBI).
However, it was not all good news for small businesses, as although there was growth in domestic and export orders, rising costs and prices continued to bite.
The SME Trends Survey showed that export orders with small manufacturers grew at their fastest rate since mid-2011 in the three months up to April.
Output growth was also at its highest for six years, and orders and output are expected to strengthen yet further in the coming quarter, the CBI said.
As a result, SMEs are in an upbeat mood, with export optimism climbing at a record rate despite the uncertainty surrounding the UK’s exit from the European Union.
But the weak pound is continuing to stoke inflationary pressure, with SME manufacturers reporting the strongest rises in unit costs and prices in six years, the report said.
And investment plans for the year ahead have deteriorated, particularly those for buildings and plant and machinery, after improving over the previous two quarters.
Despite this, investment intentions remain a little above their long-run averages.
“The UK’s SME manufacturers have hit a purple patch, with strong domestic and export demand driving a firm rise in output,” said Alpesh Paleja, principal economist at the CBI.
“But costs and prices have continued to climb, with little sign of let up over the next quarter. This is putting considerable pressure on manufacturers’ margins, and so we’re likely to see further pass-through to consumer prices ahead.”
Total new orders, domestic orders, export orders and output growth are all expected to continue to grow strongly over the next quarter, the survey showed.
For more from the report – the research for which was carried out before Theresa May’s snap general election announcement – see the CBI’s website.
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