An increasing number of small and medium-sized UK manufacturers expect a return to growth over the next quarter, signalling the worst of the recession may be starting to lift - although half are still suffering from falling new orders, according to the latest research from the Confederation of British Industry (CBI).
Nonetheless, those that anticipate light at the end of the tunnel say the improvement will come on the back of export orders and that the relative weakness of sterling- which in effect makes British goods cheaper to those buying in euros and US dollars - is finally beginning to bring some benefit.
It would also appear the credit markets are beginning to thaw for the beleaguered SME sector.
To be sure, small businesses have been hit hard by the downturn, characterised by decline in demand and the near-impossibility of getting affordable loans (and, in some cases, any loans at all).
The embattled SME sector accounts for more than half the UK's gross domestic product and employs more than 13 million people. The credit vice, which tightened throughout 2008, threatened millions of livelihoods as the country slipped into its first recession for 17 years.
While SMEs face the same difficulties of higher borrowing costs and declining consumer spending that afflict their larger rivals, which typically have more options to raise money, smaller businesses are more vulnerable in a downturn because they depended more on financing.
More than their larger counterparts, SMEs have struggled as customers fall behind with payments - and payments can be a matter of life and death for smaller businesses, particularly as banks grew more stringent with loans.
The CBI's latest quarterly SME Trends Survey, which is published today and suggests the decline in orders and output among smaller producers is slowing, provides perhaps the least gloomy outlook for the hard-pressed SME manufacturing sector since recession began to sink in its claws almost two years ago.
Recent figures from the Office for National Statistics across the entire UK manufacturing sector have shown that factory output has been falling at a slower pace.
While the CBI study of 480 businesses revealed that half were hit by a tumble in new orders over the past quarter, at the same time some 17% reported a rise - a marked improvement on the previous quarter's record low.
And while most firms continued to slash jobs in the past three months - some 40% reduced headcount - a surprising 8% of firms surveyed recruited new employees.
Russel Griggs, chairman of the CBI's SME council, said: "Business conditions remain difficult for the UK's small and medium-sized manufacturers. Orders and output are still falling."
However, he added: "Things aren't quite as gloomy as they were three months ago."
"So far, the relative weakness of sterling has not provided firms with much of an export boost. It is therefore encouraging that medium-sized companies are hopeful overseas orders will pick up in the next quarter.
"Medium-sized firms are also benefiting from improved access to credit, unlike smaller companies which tend to have fewer funding options.
"The outlook looks positive, but it is still too early to say whether export-led growth will deliver a platform for sustained recovery."
The CBI research gels with analysis by Deloitte, which signals the number of companies going into administration may have reached a "plateau" - although the accounting firm notes that any real recovery in business conditions remains a long way off.
The Deloitte study, also published today, found the number of companies falling into administration increased by 18% in the first half of 2009, compared with the same period last year.
However, while retail administrations climbed 30% in the second half, manufacturing saw a drop of 25% in the number of administrations quarter on quarter, but up 32% compared with the first half of 2008, and up 28% on the second half of 2008.
Lee Manning, a partner at Deloitte, said: "While the total level of administrations remains high, there appear to be signs that the level of administrations may have reached a plateau.
"While year on year the number has increased, the failure rate compared with the last six months of 2008 has fallen, indicating that perhaps these sectors have seen the worst of the downturn."
Total administrations for the first half of 2009 rose to 1654, compared with 1402 in the first half of 2008.
