SMEs optimistic despite declining orders

SME confidence is riding at its highest level in two-and-a-half years as firms' order books move towards stabilising, according to the Confederation of British Industry (CBI).

While the business lobby acknowledges that demand for SMEs' goods has remained depressed over the past three months, it says that companies themselves are expecting things to improve over the coming quarter.

Of 424 firms replying to the SME Trends survey, 40% saw orders decline in the three months to October, compared to 24% that reported a rise. The resulting rounded difference of -17%, although negative, was a big improvement over the previous quarter's -34% balance.

Overall, firms expect total orders to stabilise over the coming three months, with the balance of SMEs that feel optimistic about the general business situation now at its highest level since April 2007.

And the brighter outlook among businesses chimes with an improvement in consumer confidence.

According to the latest Consumer Confidence Index from the British Retail Consortium, sentiment is at its highest point in 18 months, after having sunk to its lowest ever ebb in April this year.

Russel Griggs, chairman of the CBI's SME Council, cautiously welcomed the optimism among firms.

"However, current conditions remain challenging for many small- and medium-sized UK manufacturers, with orders and output still falling, and uncertainty about demand a major concern," he added.

IMAGE Peter Byrne/PA Wire