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SME confidence knocked in third quarter

Falling domestic and export orders and contracting production levels for SMEs in the three months to October knocked business confidence in the UK, a report by the Confederation of British Industry (CBI) has found.

Its Quarterly SME Trends Survey shows that domestic orders fell by 11 per cent and export orders by 21 per cent, with exports falling at their fastest pace since July 2009.

Demand and output also reduced for the second quarter. Elsewhere SMEs reported that employment numbers remained unchanged during last quarter but were expecting a slight reduction in staff over the next three months.

The report highlights the ongoing difficult conditions that small firms are facing. With SMEs accounting for 99 per cent of all private sector businesses in the UK, business groups are urging the Government to do more to bolster economic growth in its Autumn Statement on 5 December.

Lucy Armstrong, chair of the CBI's SME Council said: "Small and medium-sized manufacturers will be disappointed by the slide in demand during this quarter. Production levels have fallen for the second quarter running and profit margins continue to be squeezed, as output price inflation fails to match growth in costs."

She added that although prospects were improving - with the UK now officially out of recession - the economic climate remains 'tough' with 'subdued' conditions at home and abroad.

Talking to the Telegraph, Mike Cherry for the Federation of Small Businesses (FSB) said that confidence and policies for growth were urgently needed.

A recent FSB quarterly survey also echoed the results of the CBIs, showing falling business confidence, tough lending conditions and cash flow issues.

"Access to finance remains a big issue for too many small businesses. Late payment is also a big issue," he said.

Commenting on the halfway point of the coalition Government's five year term, the British Chambers of Commerce (BCC) also called for more action in the Autumn Statement to improve long-term growth prospects.