South West small and medium sized enterprises continued to perform strongly in the first quarter of 2007

That's the view according to the PKF SME Index, a quarterly survey of 800 SMEs in the construction, manufacturing and service sectors.

Business output continued to expand but was down slightly at 56.0 in comparison to 59.3 in Q4 2006 (where marks above 50 indicate expansion and below 50 indicate contraction). In addition new business orders were also below those from Q4 2006, posting figures of 55.2 in comparison to 58.4 respectively, but still showed a positive performance.

The reasons given by respondents for continuing growth include increased customer demand and new orders, seasonality and more effective marketing. In the construction sector improving weather conditions were beginning to be cited as an important factor while in the service sector the end of the tax year was said to be significant.

Output charge inflation was high as SMEs attempted to counter higher input costs. Anecdotal evidence from the manufacturing sector pointed to the continuing rise in prices for raw materials as the reason behind the charges, while the service sector found it was a result of higher wage bills from salary increases.

Employment growth also showed robust increases with figures for the South West coming in at 54.1 as businesses added to their payrolls.

Neil Dimes, from PKF said: "SMEs across the South West continue to perform robustly, but ever-increasing costs of raw materials are forcing businesses to put up their prices. There have already been a number of recent interest rate rises and with inflationary pressure still building, the Bank of England will almost certainly raise them again and therefore such robust growth is likely to be restrained in the coming months."

Index readings above 50.0 signal an increase on the previous month while readings below 50.0 signal a decrease.  Seasonally adjusted. All data are quarterly averages.

Copies of the PKF SME Index, a quarterly performance survey of small and medium sized enterprises are available for download from www.pkf.co.uk

Archive index | Front page