CBI survey finds recruitment increases in second quarter for UK small and medium-sized manufacturers

Small and medium-sized enterprises (SMEs) in the UK manufacturing sector have increased recruitment in the past three months.

Research from the CBI shows that businesses have increased staffing levels by 11% despite a fall in orders and output in the second quarter of 2012.

The rise in new jobs is broadly in line with expectations, although firms responding to the CBI's SME Trends Survey predicted the next three months could see a freeze in recruitment.

In further good news for the sector, average unit cost inflation has eased significantly and now stands at +8%. This is the lowest level since the figure stood at +3% in October 2009.

While export output prices remained steady (-1%) for the third quarter on the trot, there was a slight fall (-4%) in domestic prices.

Experts predict output prices will continue to fall in the current quarter while costs are expected to be flat.

Nearly a quarter (23%) of the 359 manufacturers who responded to the survey said the second quarter had seen an increase in output volumes, although a slightly higher figure (28%) said they had fallen.

The study found that firms expect output to be broadly flat (+2%) in the current quarter.

There was a slight fall in export orders in the quarter to July (-4%), while domestic orders were flat (+2%).

The first quarter of 2012 saw a sharp improvement in optimism about the general business situation of firms, but this has now dropped back, the CBI said.

The survey found that SMEs are planning to reduce their capital expenditure compared with this time last year in the months to come.

Lucy Armstrong, chair of the CBI's SME Council, said: "Challenging domestic conditions, continuing uncertainty over the eurozone, and a broader loss of momentum in global growth, are clearly taking their toll on the UK's smaller manufacturers.

"Production has fallen over the last three months and sentiment has deteriorated, while growth in demand has stalled, with little improvement expected in the coming quarter.

"Nonetheless, smaller manufacturers have stuck by their plans to take on more staff - an increase in numbers employed is perhaps one of the few bright spots in an otherwise muted picture."

Copyright Press Association 2012