High tech manufacturers nervous about expansion

Posted on 27 Jun 2011 by The Manufacturer

Although many such manufacturers are happy to be ticking over, investment with a view to grow their businesses is still a long way off, according to a new GE survey.

The six monthly release of the GE High Tech Manufacturing Index has indicated that although just under a third of firms surveyed said they were now operating at close to or full capacity, nearly half of those that are operating at this level said they had yet to put arrangements in place to increase their capabilities and expand their company. The general economic uncertainty was one reason for this caution.

Compared to the last index survey conducted in December last year, feelings in the industry about the current performance of their overall business remains strong, with the net positive score amongst those polled increasing slightly from +68 to +71 from December 2010 to June 2011.

Over three quarters of the 403 UK high tech manufacturers surveyed said they felt either fairly positive (48%) or very positive (29%) about their current business situation.

In contrast the respondents are still negative about general economic conditions in the UK. In Q4 2010, 31% reported ‘fairly positive’ or ’positive’ feelings. Regarding the general economic situation in the UK in June 2011 this figure is little changed at 30%. However, respondents were slightly more optimistic about the oncoming year. 40% of those surveyed said they thought the general economic situation in the UK would get a little or a lot better over the next 12 months – this was an increase of 2% compared to the same time last year.

GE UK CEO Mark Elborne said: “UK high tech manufacturers are optimistic but it is not surprising they are being cautious about business investment. They see great opportunities in international markets and growth sectors such as green technologies but have to be careful about these decisions because there is still a backdrop of general economic uncertainty.”

Despite nearly half the respondents being close to or at full capacity, they said they felt that they had no plans to address this situation, and believed that finding the right skilled staff was an issue preventing them from expanding.

While manufacturers benefited from low interest rates and strong growth in emerging economies and developing countries, there was a great deal of negative factors, overweighing the positive ones. High input costs remain an important factor for businesses, as well as the number of bank holidays in May. The severe weather in winter, the VAT rate increase, the relatively weak performance of the rest of the UK economy and global political unrest since the beginning of the year in Middle East and North Africa have all had negative effects on trading figures.

Growth from international markets were reported to be a large cause of optimism for UK manufacturers, as well as a potential growth in domestic orders. When asked the question: “What are the main factors behind this optimism,” the predominant answer was an increase in exports and the strength of new and emerging markets. The weak pound was also highlighted as a factor, but was seen as less important than fast growing overseas markets.

George Archer