Action needed as optimism among SMEs drops

A survey of almost 400 small to medium sized companies (SMEs) showed that output growth slowed in the past three months, with a record one in four citing labour shortages as limiting their investment plans.

The CBI said its study found that two out of five firms were working below capacity, while investment in plant, machinery and buildings is expected to be cut back.

But there has been an increase in new orders, while hiring intentions for the next few months remain “robust”.

Alpesh Paleja, the CBI’s Principal Economist, said: “The latest survey suggests mixed fortunes for our smaller manufacturers.

“While growth in new orders has held up and headcount has risen strongly, output growth has lost some steam over the last quarter.

“Coupled with ongoing pressure from labour shortages, it’s understandable that optimism among manufacturers has fallen.

“The Chancellor should use the Budget to fire up our factories by reforming business rates, and setting out a clear plan to bring the UK’s Industrial Strategy to life.”