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SME trends turn positive as orders pick up

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Confidence among small firms has improved

Business confidence among SME manufacturers stabilised in the quarter to April, according to the CBI’s latest SME Trends survey, ending a run of five consecutive quarters of declining sentiment. 

SME manufacturers expect both output and new orders to pick up in the three months to July as some of the challenges that faced the UK’s SME manufacturing sector in 2022 continued to ease.

The share of firms reporting that shortages of skilled labour and shortages of materials or components could constrain output over the next three months fell back further from last year’s highs (while remaining above average).

The share citing concerns over orders or sales rose to its highest level since July 2021 (but remained below average). 

The survey suggests that both cost and price growth eased over the quarter, slowing from 2022’s record rates, though remaining historically strong.

SMEs expect growth in average unit costs to slow further in the next three months, but to continue to outpace growth in domestic selling prices, which are expected to increase at a similar rate to last quarter.

Investment intentions were mixed, with SME manufacturers expecting to reduce spending in buildings in the year ahead and to keep spending on plant and machinery flat. Spending on innovation, and on training and retraining is expected to rise. 

Construction activity improving

Activity in the Scottish construction sector is expected to pick up after months of negativity, according to the latest Royal Institution of Chartered Surveyors (RICS) Construction Monitor.

On a 12-month horizon, Scottish surveyors expect growth, with a net balance of +12% saying that workloads will be higher in a year’s time. The last time the indicator was in positive territory was Q2 2022. 

Looking at the current workloads, private housing experienced the steepest slowdown of the sub-sectors, with a net balance of -21% of respondents reported.

Most other sub-sectors were said to have had broadly flat workloads other than infrastructure. A net balance of +14% of respondents said that infrastructure workloads increased in the quarter. 

With the expected rise in workloads, respondents in Scotland also expect employment to increase, though skills shortages do not appear to have eased.

Shortages of quantity surveyors bricklayers and other construction professionals continue to be reported.  

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