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Monday, 14 May, 2001, 06:24 GMT 07:24 UK
UK business confidence plummets
A worker with UK flag behind
Small manufacturers suffer fall in confidence
Small and medium sized manufacturers in the UK are considerably more pessimistic now than they were in January, having suffered the biggest fall in confidence for more than two years, according to the Confederation of British Industry (CBI).

The balance of businesses that felt more optimistic in January compared to April has fallen from plus seven to minus 30, the CBI reported.

During the last three months, manufacturing output fell at its fastest rate since October 1999, creating a very downbeat atmosphere among small firms, with medium firms being slightly less pessimistic, the CBI reported.

Both prices and unit costs are also on the slide in the UK manufacturing sector, and as a consequence UK businesses are seeing their profit margins being squeezed.

Investment

Many small and medium sized companies have decided to tighten their belts and cut back on investments, a trend that the CBI found particularly worrying.

The cutbacks could make it harder for these companies to compete in the long run, said a senior CBI official, Simon Bartley.

"Last week's quarter point cut in interest rates was timely, but it remains to be seen whether or not it makes SMEs (Small and Medium Enterprises) more confident about investing in the future," he said.

The main problems with the interest rate cut are a lag in its effectiveness, and the fact that it was discounted by many market players ahead of time, added Mr Bartley.

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Simon Bartley, CBI
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See also:

24 Jan 01 | Business
12 Apr 01 | Business
05 Mar 01 | Business
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