Slowing exports are hurting the performance of SME manufacturers despite growth remaining positive in the 3 months to July 2015, a survey by the Confederation of British Industry (CBI) shows.
Productivity and sales continued to strengthen over the past 3 months with 30% of those surveyed reporting a rise in output and 30% seeing growth in domestic sales.
However, many SME manufacturers have seen their overseas sales hit as fluctuations in the GBP-EUR exchange rate drives up costs for European customers. More than a quarter (26%) of responding businesses said their export sales have fallen in the past 3 months, compared to 18% that said they had grown.
Prices – the main factor in hurting overseas sales according to 49% of firms – also fell at their fastest rate since 2003 between May and July 2015.
The majority of exporters were pessimistic about their export prospects for the second consecutive quarter, and many are anticipating the poor performance to continue into the next quarter.
The prospect of falling overseas sales has done little to dent the optimism of many small and medium-sized manufacturers: 32% of surveyed businesses said they were positive about their business situation, up from 23% in April.
Anna Leach, head of economic analysis at the CBI, said:
"Optimism among smaller manufacturers improved this quarter, alongside steady employment growth, rising output and new domestic orders.
"But the relative strength of the pound against the euro is hitting export orders and margins, while uncertainty regarding Greece threatens growth prospects in the eurozone."