SENTIMENT about the general business situation has fallen among the UK’s small and medium-sized manufacturers, according to a study published today.

The CBI report says small firms expect no growth in demand and output over the coming quarter, and are reappraising their business plans as a result.

Of the 411 respondents to the CBI’s quarterly SME Trends Survey, 18% of manufacturers reported they are more optimistic than three months ago, and 28% said they were less optimistic. The resulting balance of -10% marks the first notable decline in sentiment in two years.

This comes against expectations that growth in activity will not hold up in the next three months.

Total orders rose strongly once again (a balance of +19%) in the three months to July, and factory output continued to grow (+12%) at a pace above the long-run average.

However, firms expect orders and production to be broadly unchanged over the next quarter (at +3% and +2% respectively).

Lucy Armstrong, chair of the CBI’s SME council, said: “Orders and production have been strong for the UK’s smaller manufacturers this quarter, but growth is expected to stagnate in the next.”