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Monday, 12 February, 2001, 12:59 GMT
Small business finds new optimism
Man works a lathe
Small businesses are more optimistic than larger manufacturers
The UK's small manufacturing firms are in an optimistic mood, with confidence rising for the first time in a year, new data from the Confederation of British Industry (CBI) shows.

And confidence about the prospects for exports has risen for the first time since October 1996.

The change in sentiment comes from a small increase in orders over the
Business confidence among small manufacturers
Jan 2000 +10
Apr 2000 -4
Jul 2000 -11
Oct 2000 -1
Jan 2001 +7
last four months, and expectations that orders will increase much faster in the coming months.

The news will help dispel fears that the UK economy is beginning to weaken in the face of a US economic slowdown.

Reducing prices

But the buoyant mood of small manufacturers contrasts with the CBI's wider survey which revealed an overall decline in business confidence.

News of slashed jobs and plant closures by industry giants such as steelmaker Corus has affected the larger manufacturers but has not squashed the optimism of smaller firms.

But the outlook for small companies is not all rosy, with profit margins under pressure despite the expected increase in productivity.

Optimism for exports in 2001
Jan 2000 -1
Apr 2000 -13
Jul 2000 -17
Oct 2000 -5
Jan 2001 +5
"Worryingly, companies are still having to reduce prices to hold on to market share, which means profit margins are being cut to the bone," said Kate Barker, chief economic adviser at the CBI.

And reduced profits will have a knock-on effect on investments and the creation of new jobs.

The CBI surveyed 895 manufacturers with fewer than 500 employees which are classed as small or medium sized manufacturers.

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See also:

12 Feb 01 | Business
Cheap oil takes factory prices down
25 Jan 01 | Business
Exporters defy the pound
24 Jan 01 | Business
Business confidence falls
18 Jan 01 | Business
Manufacturing recovery still fragile
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What and who is the CBI
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