Pessimists outweigh optimists in ranks of small business, says CBI

Optimism among small businesses has slumped for the second quarter in a row as firms grew more gloomy about the outlook for new orders and worried increasingly about the constraints on their prospects for growth, a report from Confederation of British Industry said today.

Optimism among small businesses has slumped for the second quarter in a row as firms grew more gloomy about the outlook for new orders and worried increasingly about the constraints on their prospects for growth, a report from Confederation of British Industry said today.

The number of pessimists among businesses that employ up to 500 people outweighed the optimists by 11 per cent, compared with 4 per cent in April and a reversal from the optimism seen in the January survey.

The CBI used the gloomy survey to appeal for help for the sector from the Government and the Bank of England. "Companies will be looking for the period of interest rate stability to continue, following this month's encouraging 'no change' decision," said Sudhir Junankar, a senior CBI economist. "We also urge the Government to reduce the regulatory burden to help ease the pressure on smaller companies."

The survey showed export optimism for the year ahead fell to its lowest level since April last year while export orders plunged at their fastest rate for a year. Total new orders fell slightly. Prices fell while costs rose, indicating that profit margins continue to be squeezed.

This appears to have dented investment plans, as fear of an inadequate return was a key deterrent on intentions to increase investment along with uncertainty about demand, and a shortage of internal finance.

Firms are growing increasingly worried about the tight labour market. The number of firms warning that a shortage of skilled labour rose sharply over the last four months with 16 per cent worried compared with 10 per cent a year and a half ago.

Despite the shortage of skilled workers, total employee numbers fell again,at the same rate as seen in the last three surveys. The CBI said that, once again, the slowdown in job losses that had been expected in the April survey did not materialise.

The survey will back up recent pleas by Digby Jones, the director general of the CBI, to cut red tape affecting business.