SMALL and medium-sized manufacturers suffered further falls in overseas and domestic orders, but anticipate an improvement in UK levels in the next quarter.

That is the finding of the latest quartely SME Trends Survey by bosses’ organisation the CBI published today.

It reported gloomy findings for the last three months to January, confirming that production also decreased for the third consecutive quarter.

However, both domestic orders and output are expected to increase in the coming three months.

The CBI survey, which had 347 respondents, showed that total new orders fell slightly (-5%), for the second quarter running.

This was driven by falls in both domestic orders (-6%) and export orders (-9%), although both declined at a slower pace than the previous quarter (domestic orders by -11%, and exports orders by -21%).

However, SMEs (small firms) expect total new orders to grow over the next three months (+9%), likely to be driven by anticipated growth in domestic orders (+10%), in contrast, export demand is expected to be broadly flat (-2%).

In line with falling demand this quarter, output continued to fall (-8%), failing to meet expectations of modest growth (+5%).

However, once again, production is expected to increase next quarter (+7%).

With less activity over the last three months, numbers employed in the sector fell slightly (-4%), for the first time in three years. But SMEs anticipate an increase in headcount in the next quarter (+11%).

Anna Leach, CBI head of economic analysis, said: “Activity has continued to contract this quarter, with falling production disappointing growth expectations.

“Nonetheless, better news on the domestic front is expected, with output and domestic orders set to rise modestly. But there is little sign of improvement in export prospects, and uncertainty over demand continues to weigh on investment plans.”