Growth among smaller and medium-sized (SME) manufacturers remained positive in the three months to July, but exports dragged down overall performance, according the latest CBI SME Trends Survey.
The survey of 408 companies reported steady growth in new domestic orders over the quarter and a rise in output in line with expectations.
Business optimism also improved a little further in the three months to July, the CBI said.
However, new export orders fell, having been broadly flat for the previous two quarters.
Export prices continued their downward trend, falling at the fastest pace since October 2003, and are widely expected to limit export orders in the next quarter.
Looking ahead, growth in output and total and domestic orders is expected to gather pace, while exports look set to fall again in the three months to October.
Average unit costs fell a little for the first time since 1999, with domestic prices staying broadly flat.
More jobs were added in the three months to July, and employment growth is projected to continue through to October.
Anna Leach, CBI Head of Economic Analysis, said today: “Optimism among smaller manufacturers improved this quarter, alongside steady employment growth, rising output and new domestic orders.
“But the relative strength of the Pound against the Euro is hitting export orders and margins.
“This, alongside uncertainty regarding Greece, threatens growth prospects in the Eurozone.”
Last month, Greece’s parliament approved tough new conditions set by lenders.
In the three months to July, 32 per cent of small and medium sized enterprise (SME) manufacturers said they were more optimistic, while 18 per cent said they were less optimistic, giving a balance of +14 per cent, up from +4 per cent last quarter
The balance for employment expectations over the next three months was +17 per cent.
Across the UK, the CBI represents the interests of 190,000 businesses of all sizes and sectors, which employ nearly seven million people, which is about one third of the UK’s total private sector-employed workforce. It also has offices and representation in Brussels, Washington, Beijing and Delhi.