The UK's small and medium sized manufacturers saw orders for goods and output decline at the fastest rate in more than 20 years, according to the CBI's latest quarterly SME Trends survey.

But firms are feeling hopeful that the pace of decline may start to moderate slightly over the next three months.

Of the 484 firms surveyed, 64% saw the volume of total new orders fall in the three months to April, while 13% reported an increase. The resulting balance of -51% is the lowest figure since the survey began in 1988.

That had a knock-on effect on the volume of output with 57% of firms reporting a decline, and 9% seeing a rise, giving a balance of -48%, another survey low.

Russel Griggs, Chairman of the CBI's SME Council, said: "It has been a torrid few months for smaller manufacturers. With orders and output falling at the fastest rate since this survey began, many firms have had no option but to let staff go.

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"Although companies seem hopeful that the pace of decline in manufacturing activity may be moderating slightly, the next three months are still going to be very tough for many firms."

The survey shows worries about credit and finance are continuing to constrain some firms' plans, but the council are hopeful that recent government and monetary measures should see access to credit getting easier in the coming months.

Job losses continued to accelerate with half of respondents (50%) reducing their headcount in the quarter, and 6% taking on staff. The resulting balance of -44% is a survey low.

Looking ahead, firms seem hopeful that the pace of the decline in orders, output and employment may ease slightly in the coming quarter (a balance of - 27% for orders; a balance of -33% for output and a balance of -32% for employment).

As a result, business sentiment fell at a slower rate (a balance of -42% compared to January’s survey low of -71%).

Despite the relative weakness of Sterling, export orders shrank at a faster rate than firms had been expecting (a balance of -39%), while domestic orders also remained very weak (a balance of -52%).

Companies are running down their stocks more quickly, although not as fast as expected, and 74% of firms are working below capacity.

Credit or finance worries are continuing to constrain firms export and output intentions, and companies are scaling back training and investment plans.

(GK/JM)