UK manufacturers invest

Britain’s manufacturers are planning to invest across a range of areas in the next two years in an effort to boost productivity, according to a survey released by EEF, the manufacturers’ organisation and Lombard Asset Finance.

The survey shows manufacturers’ investment in the latest machinery has grown rapidly in recent years to keep up with rising demand and to make good on past cutbacks. The research shows more growth in investment in machinery and equipment to come, but a slower pace of increase reflects a switch in focus to ‘intangibles’ such as training, recruitment, R&D, software and marketing in order to derive a competitive advantage.

While productivity is a major investment driver, the levels of new spending are being affected by confidence in the demand outlook, emerging capacity constraints and diversification into new business areas. However, growth scenarios in Europe could either boost or bust manufactures’ capital expenditure plans for the coming years with a sustained recovery across the region pushing investment levels higher, while a break up would send growth into reverse for many companies.

The survey also shows that one-third of manufacturers believe the UK to be a more competitive place to invest than two years ago. According to EEF, this is due to the supportive industrial policy pursued by the previous coalition, which has sent favourable signals for the UK as a place to invest.  EEF is urging the new government to maintain these policies, especially the supportive schemes backing skills, science and innovation.

Commenting, Ms Lee Hopley, chief economist at EEF, the manufacturers’ organisation says: “UK manufacturers’ ongoing commitments to invest in technology, skills and innovation provide positive signals about the sector’s future growth and productivity prospects. Some of the barriers that companies’ investment strategies came up against following recession have clearly faded, but it is vital that their current plans stay on track.

“Some sectors are facing headwinds from more uncertain demand, but big questions about the future economic prospects for European partners present one of the biggest external risks to firms ability and confidence to press ahead with vital investment.

“UK efforts to build solid policy foundations are still needed to support the efforts of investment-intensive and highly productive sectors – like manufacturing – if the UK economy is to return to a more sustainable and balanced path of economic growth.”

Commenting Ian Isaac, Head of Lombard says: “Manufacturers continue to lead the way for the UK economy, recognising that improved productivity is the key driver to deliver ongoing and sustainable growth. It is particularly encouraging to see that over 95 per cent of companies plan to invest in raising their productivity levels over the next two years. This strategy is echoed by Lombard’s own research, which shows that increasing efficiency to drive productivity is a key element in manufacturers’ business investment plans.

“When you put this in the context of improved access to credit, it is clear that UK manufacturing has an opportunity to build on its recent revival and further establish its competitive position on the global stage. As a funding provider we’ll continue to work with manufacturers to ensure that they have the funding foundations in place to make this happen.”