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Fall in manufacturing output

SMALL and medium-sized manufacturers in the UK suffered further declines in new orders and output volumes in the three months to April, a survey from the Confederation of British Industry reveals.

The CBI survey, published today, highlights the continuing difficulties facing the UK economy, which dodged triple-dip recession with a 0.3% rise in gross domestic product (GDP) in the first quarter but remains significantly adrift of its peak in GDP ahead of the Great Recession of 2008/09.

The survey comes hard on the heels of a report published late last month by CBI Scotland, which showed Scottish manufacturers as a whole suffered an accelerating decline in domestic orders and output volumes in the latest three months, amid plunging optimism.

The CBI's UK-wide survey of trends among small and medium-sized enterprises (SMEs) in the manufacturing sector shows a fall in both domestic and export demand for these firms.

Subtracting the percentage of SME manufacturers reporting a rise in total new orders in the three months to April from those posting a fall, a net 14% experienced a drop.

This is the third consecutive quarterly drop in total new orders, and the latest reading signals an accelerating rate of decline. The outturn also contrasts with a balance of 9% which had predicted a rise in new orders during this period in the previous quarterly survey.

A net 15% of SME manufacturers in the UK reported a drop in domestic orders in the latest three months – also a third consecutive quarterly fall. And a balance of 8% reported a fall in export orders – continuing a lengthier run of decline.

Meanwhile, a net 5% of SME manufacturers reported a fall in output volumes in the three months to April. This contrasts with a balance of 7% which had forecast a rise in output volumes in this period in the previous quarterly survey.

SME manufacturers' output volumes have now declined for four consecutive quarters.

The survey is the latest of a slew of economic indicators to highlight the extent to which Chancellor George Osborne's vision of "a Britain carried aloft by the march of the makers", set out in his March 2011 Budget, has failed to materialise.

Stephen Gifford, CBI director of economics, said: "It's been another disappointing quarter for small and medium-sized manufacturing firms, who have seen new orders and output continue to fall."

The survey signalled a modest rise in employment in the SME manufacturing sector in the three months to April. A net 3% of firms raised employment in the latest three months, an improvement on a balance of 4% reporting a fall in the previous quarterly survey.

And Mr Gifford highlighted hopes among SME manufacturers, expressed in the survey, that export orders would rise sharply in the coming three months.

He declared the recent weakening of sterling would have "boosted the competitiveness" of the UK's smaller manufacturing firms.

The survey also highlighted continuing pressure on SME manufacturers' profit margins.

The fall in overall manufacturing output volumes in Scotland in the latest three months, revealed in last month's CBI Scotland survey, contrasted with the situation in the sector as a whole UK-wide, and the decline in domestic and total new orders was sharper north of the Border.

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