According to the latest quarterly CBI SME Trends survey, business optimism among small and medium-size manufacturing firms deteriorated in the three months to July — and at the ‘fastest pace’ since July 2016.

The survey of 268 manufacturers also reveals that optimism regarding export prospects for the year ahead also deteriorated — to the greatest extent since the financial crisis of 2009.

The CBI said manufacturing activity was weak among SME manufacturers, with both domestic and export orders falling at the quickest rates since April 2013 and October 2015 respectively.

Firms say they expect domestic orders to continue falling over the next three months, and output and export orders to remain flat.

Other results included investment intentions for the next year remaining poor, with manufacturers expecting to spend less on buildings, plant and machinery, as well as training and retraining; moreover, capital expenditure on products and process innovation is expected to be flat (relative to the past year).

Growth in stocks also slowed noticeably, following a record-high pace of growth (for raw materials and finished goods stocks) in the previous quarter.

Head-count was flat in the quarter to July, following six years of continuous growth; it is expected to remain broadly steady next quarter.

Alpesh Paleja, CBI principal economist (pictured) (www.cbi.org.uk), said: “Against the backdrop of slower global growth and continued Brexit uncertainty, optimism among SME manufacturers is waning.

"With orders falling and output and head-count stalling, the new Prime Minister must restore confidence and set out a pro-enterprise path that supports SME manufacturers.

"Firms will also be looking for early signs of how domestic priorities — from fixing the apprenticeship levy to improving infrastructure — will be delivered.”