Smaller manufacturers have seen the pace of recovery slow since the start of the summer, according to figures published today.

The CBI's quarterly survey of small and medium-sized companies shows business optimism is broadly unchanged since three months ago, while orders fell marginally.

The CBI says the pause in growth could reflect the initial impact of higher interest rates in the UK, which have risen five times in eight months.

A drop in demand from overseas markets, particularly the US, and high oil prices were also blamed for the slightly disappointing figures.

But there were positive signs for the sector.

The number of people employed rose for the first time since January 1998 and the amount of firms working below capacity fell to the lowest level since October 1997.

Hugh Morgan Williams, of the CBI, said: "Although we have seen a slight pause in the recovery for smaller manufacturers, there are encouraging signs of a positive trend.

"However, the recovery is fragile and has started from a low base after a long period of decline."

Monday August 16, 2004