Firms create jobs despite feeling pinch
May 13 2008 by Sarah Green, The Journal
THE findings of the latest CBI SME survey reflect the mixed messages we are getting from business as a whole.
While there is clear evidence that small businesses are feeling the pressure of current economic conditions and facing sharp rising costs, the good news is that many are still expanding and creating jobs.
The survey reports that small and medium-sized manufacturers have sharply raised the prices of their goods to try to tackle the strongest cost pressures in over 20 years. Demand for their goods has fallen both at home and abroad.
Yet despite this, job numbers are growing in the sector, and the smallest firms have been particularly active in hiring new staff. During the three months to April, 51% of survey respondents said that their average unit costs had gone up, and 7% said they had decreased. The resulting balance of +43% is the strongest in over 20 years. SME manufacturers are now passing on these growing cost pressures to customers. A balance of +20% of firms raised domestic prices over the last three months, which is the strongest since April 1995, and a similar number expect to do so in the next quarter. The volume of export orders fell unexpectedly and despite the weaker pound, with a balance of 11% reporting a drop. Medium-sized firms were hit quite markedly, and bullish expectations of export growth were disappointed as orders fell at their fastest rate (-19%) since April 2002 (-22%).
SME manufacturers expanded their workforce over the past three months, but there was a stark difference between the smaller firms – where a balance of +12% taking on more staff was the highest since April 1995 – and the medium-sized firms, where a net 8% cut jobs.
The uncertain wider economic climate has resulted in some mixed findings. What is certain is that small and medium-sized manufacturers are continuing to feel the impact of higher fuel and raw material costs, and that they are now having to pass these on to customers.
While the drop in export orders is worrying, particularly for medium-sized firms, there are some more encouraging signs: smaller firms have been quite bullish about taking on extra staff, and some growth in output is forecast for the months to July.
Sarah Green is regional director of the CBI.
