The latest SME trend survey by the CBI found that customers remain cautious.
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Optimism among small and medium-sized manufacturing firms (SMEs) has plunged in the last three months faster than any pace since July 2016, according to the Confederation of British Industry.
The latest CBI SME Trends Survey for October also found that of the 240 manufacturers interview, optimism around exports for the year ahead also remains gloomy.
Total new orders fell slightly in the three months to October – down 6%, at a similar pace to July, when there was a 4% fall.
Both domestic and international orders fell 12% and 6% respectively – with customers sitting on their hands due to the political and economic uncertainty from Brexit.
The data echoes the latest manufacturing PMIs, the closely-followed survey of the entire sector, which saw the industry contracting in October for the fifth month in a row.
Officials at the CBI added that output remained flat in the three months to October, and is expected to fall next quarter by 9%.
SMEs blamed the political and economic uncertainty abroad as the biggest reason for lacking optimism, followed by import licence restrictions.
Jobs in the industry shrunk by 5% for the first time since January 2013 and is expected to fall at a similar pace in the next quarter, it added.
As a result of the uncertainty, companies said spending on plants and machinery were down 20%, with staff training spends down 25%.
Alpesh Paleja, CBI Lead Economist, said: “As a first step to lifting the malaise, the next government must get behind business to deliver on a Brexit deal, particularly one that unlocks a smooth transition period.
“Then the real heavy lifting can begin on forging a future relationship with our biggest trading partner. Ending political uncertainty will enable a renewed focus on domestic priorities, which is critical for the economy’s longer-term growth.”