This sharp fall is largely attributable to the COVID-19 crisis, with over four out of five firms noting that the measures to contain the outbreak had a negative impact on their domestic output.

The survey of 301 SME manufacturers reported that total new orders in the three months to April fell at the fastest rate in seven years. Domestic orders fell at broadly the same pace as the previous quarter, while export orders dropped at their quickest rate since October 2015.

Chiming with weak activity this quarter, business sentiment in the quarter to April dropped by its fastest on record. Export sentiment also fell at a survey-record pace.

Looking ahead, manufacturers expect output to plunge at a faster pace next quarter, marking the weakest expectations on record (since 1988). Both new domestic and export orders are anticipated to contract at a much faster pace next quarter, also constituting the weakest expectations on record.

Investment expectations for the next year for buildings and plant & machinery deteriorated to survey-record lows, as a record high proportion of firms reported uncertainty about demand as a factor to limit future investment.

Headcount in the quarter to April fell at its quickest pace since October 2009. Firms expect employment to fall at a much faster pace next quarter, marking the weakest expectations on record.

Additional questions added to the survey in relation to COVID-19 revealed that:

• Over four out of five of firms have seen a negative impact on their domestic output
• Around two-thirds of firms have seen a negative impact on international output
• Just over half of firms have partially shutdown/closed UK production/activity
• A little over half of firms mentioned that they temporarily laid off staff, compared with 9% reporting permanent layoffs.
• Three-quarters of firms faced cash flow difficulties.

Alpesh Paleja, CBI lead economist, said: “SME manufacturers are seeing a sharp shock to activity due to the COVID-19 outbreak, with expectations signalling a sharper downturn to come. Nonetheless, manufacturers are doing all they can to support communities and employees during this difficult time.

“The government’s support schemes have been a real lifeline for businesses so far, and they should remain conscious of getting money to those who need it quickly. This will be a critical step to restarting the economy once it is safe to do so, which will require a strong partnership between government and business.”

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