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Small firms see sharp rise in job losses

Small and medium-sized businesses are axing jobs at a rate not seen for almost twenty years, the CBI has reported.

According to the CBI’s latest quarterly SME trends survey, in the three months to January, employment, the volume of total new orders and output among manufacturing SMEs fell at their fastest rate since the early 1990s.

The survey took in 500 firms and found that most expect the first quarter of 2009 to be even more difficult.

Just 7 per cent of the businesses polled said that their workforces had grown during the quarter, while 38 per cent cut the number of staff on their books. The resulting balance of minus 31 per cent represents the steepest quarterly fall in employment since January 1992.

Even worse was the volume of total new orders during the quarter: this slumped at its fastest rate since July 1991, with 54 per cent of firms saying that they had experienced a decline and only 13 per cent enjoying an increase, giving a balance of minus 41 per cent.

There was little optimism about the imminence of any recovery. Expectations for volumes of total new orders (a balance of minus 56 per cent), output (minus 46 per cent) and employment (minus 38 per cent) in the next quarter are the weakest in the survey's history.

The biggest problem facing firms, the CBI said, is weak demand, cited by 85 per cent of businesses. Credit and finance is another pressing issue, with 11 per cent of firms concerned that limited access to funding is likely to hamper output in the next quarter, up from 6 per cent in October.

Russel Griggs, the chairman of the CBI's SME council, said of the survey: "The jobs picture among smaller manufacturers has deteriorated markedly since last July in the face of rapidly declining demand for UK-made goods at home and abroad.

"Firms are steeling themselves for a very difficult few months with output and orders expected to fall at a record pace in the next quarter. As a result, job losses are expected to accelerate among SMEs."

Mr Griggs highlighted the importance of business lending as a way of staunching the number of jobs that are going: "This survey closed before the government's measures to kick-start lending across the economy were announced and we hope these will soon begin to make it easier for firms struggling to access the credit they to go about their day-to-day business. Only the availability of credit will help stem the tide of job losses."