A Confederation of British Industry (CBI) survey has revealed a sharp fall in business confidence among SME manufacturers which is being driven by a decline in both output and the volume of new orders.

The CBI’s latest SME Trends Survey paints a stark picture of the challenges facing UK small and medium-sized manufacturing firms, with business optimism falling for the fourth quarter in a row. In the three months to October, net optimism fell to -42% from -22% in July, the sharpest rate of decline since April 2020.

Firms reported a reduction in both output volumes and new orders, and expect a further drop in output over the next three months. The survey also reported that cost growth and price growth eased slightly, although both remain exceptionally high by historic standards.

CBI Lead Economist Ben Jones said, “SMEs face continued challenges in the form of skills shortages, high costs and shrinking order books, which are weighing heavily on investment plans. Firms need decisive action from government to calm markets, help support small businesses through a difficult few months ahead and build confidence in a rapid economic recovery. This should include much-needed reforms to business rates and the Apprenticeship Levy.”