As a geographical analogy, business investment in Britain has been akin to the Kalahari Desert. But a spate of surveys this week show that manufacturers are poised to invest. What are they going to buy?
Business investment in Britain has been dreadfully dry. The Economist in July placed Britain behind Mali on a table of investment as a proportion of GDP – in 159th place.
Revisions to GDP estimates given in June suggest that economic output is still 3.9% lower than its 2008 peak, a worse performance than any other G20 country except Italy.
And there are plenty of anecdotal examples. Tube bending machine maker Unison invested in a new 2,200m3 factory, packaging equipment company Duo UK has expanded its premises and purchased a £750,000 co-ex plastic machine (see photo), clothing manufacturer Xamax’s £400,000 investment has helped sales soar by 40%, and Wyke Farms has spent £5m on phase 1 of its 100% Green Business Initiative, including a new biogas plant.
But as companies lick their recessionary wounds and focus, even more, on cost reduction and efficiency, what does new investment mean?
Will the UK see a game-changing swing into new automation equipment, to cut labour costs further and catch up with some of our more automated peers, such as Austria and Spain?
Will it be a splurge on high end machine tools, as lower end and old tools are upgraded to the latest 5-or 7-axis machining centres from DMG Mori Seiki, Doosan and Yamazaki? Will conveyor systems and material handling see a spurt?
Or will naturally cautious firms look to softer types of innovation – optimizing current machines, lean six sigma, improving training, better design and more service innovation – to broaden their product offering?
Felicity Burch, economist at manufacturers’ organisation EEF, says its survey with NatWest deliberately focused on intangible forms of investment, such as process, service and product innovation.
“These important forms of innovation are growing as the manufacturing sector becomes more service-oriented,” she says. And often a capital equipment investment compliments an investment in training, e-commerce or other softer forms of innovation.
Servitisation of manufacturing is changing the investment landscape. “We’ve noticed that in the past three years there was not much service innovation, while there was an intention to do so,” says Miss Burch. “Now there is an intention to do much more. But service innovation is a major challenge – for many firms it is a big shift in how they operate, from pure manufacturing to a service model.”
What is “service innovation”?
One case study, Automated Insulations, has worked much more closely with its customers – car makers – on the design of its insulated door linings. Before, the customer had to rework some of the designs for the specific door panel. “Working more closely together eliminates the rework, and this two-way design service has reaped more orders,” says Burch. “The idea to help your customer use your product better is a strong theme at the moment, there is much more collaboration in manufacturing – such as the rise in Knowledge transfer Partnerships in SMEs,” she adds.
The Manufacturer wraps some industry experiences of investment seeping into the parched manufacturing landscape.
PACKAGING INDUSTRY, AUTOMATION, TESTING EQUIPMENT
Loma Systems is a metal detection and X-ray inspecting systems company.
“Over the last 12 months, the competition for supermarket contracts has become fierce,” says Tony Bryant UK sales manager. “SMEs are investing significantly more in metal detection equipment not only to protect their brand but also to advocate themselves as a supplier of quality products. Manufacturers are taking steps to invest in capital equipment and with the help of leasing this offers SMEs great benefits as they grow”.
Sumitomo (SHI) Demag, injection moulding equipment manufacturer.
Nigel Flowers, managing director, says: “There is most certainly optimism for equipment suppliers.
“The total UK and Eire market value is up by 25% in 2013 YTD compared to the same period last year and enquiry rates too, are on the increase. Heavy investment in machinery and automation continues in the automotive sector but we are seeing gains in both the packaging and medical markets which are contributing to our success.”
The Manufacturing Technologies Association doesn’t have any current data that supports the investment spree, but decisions to buy machine tools today would not manifest as data for some weeks.
However some companies are bullish about investment patterns.
DMG Mori Seiki, a premium machine tool company
Steve Finn, managing director of DMG Mori Seiki, has three observations about the current mood.
“In June and July we would normally see a drop-off in sales and enquiries. Buying large machine tools is often a committee decision, and often someone is away from June through August. This summer we have seen no discernible difference in the number of orders and enquiries from any other time of the year, showing that customers cannot wait for the committee to make the investment.
EMO, the biannual European machine tool and technology show, this year hosted in Hannover, is also a pointer. “I have never seen so many Brits at EMO than are booked to go this year,” says Mr Finn. “The city is booked out, the nearest hotel is 40km away and costs Eu500 a room. We are taking 100 people with us, mainly customers – that’s unprecedented. This year the group has 94 machines on its stand – EMO is massive.”
Finn takes the Purchasing Managers Index, PMI, as a strong guide to investment. “In the last PMI in July, all three sectors of manufacturing, construction and retail were up, the first time this has happened for months. I think manufacturing, a small sector, benefits when the others are also up. The economy is more interlocked than we think – these sectors growing together pulls up manufacturing investment.”
ABB Robotics UK and Ireland, global robot systems and automation equipment company
Mike Wilson, General Industry Sales and Marketing Manager, says: “ABB Robotics has seen a significant increase in the level of enquiries and orders from UK manufacturing industry in 2013.”
“What is particularly encouraging is the increase in orders across a broad spread of UK industry sectors. We are forecasting 2013 general industry sales (all business outside of automotive) will be about 30% higher than 2012.”
Bruderer UK, a manufacturer of high quality punching presses.
Adrian Haller, managing director, says: “It is really buoyant at the moment and we are seeing a major increase in enquiries from existing and new customers.
“We’ve sold a lot of pre-owned machined in 2013, but have already got two state-of-the-art presses on order for next year – one of which will be unveiled at MACH 2014. This means we’ve already got £750,000 secured for 2014’s turnover and I would expect to smash the £4m barrier for the first time.”
“Our biggest problem is finding people with the right skills to help us cope with demand. We’re increasingly looking for mechanical engineers, who are also trained in electrics and they’re like gold dust.”
Zwick Roell – testing and validation machines
“To ensure survival in increasingly tough global markets, it is essential that UK industrial manufacturers find new ways to improve efficiency, maximise productivity and reduce scrap,” says marketing manager Alan Thomas.
“Simultaneously, discerning customers insist on products that have longer life, perform better and cost less. These challenges provide a good platform for Zwick Roell to partner a wide range of industry sectors in order to assist in ensuring a competitive edge.
“Due to a growing confidence in the UK manufacturing sector we are witnessing an increasing trend towards significant investment in high-end testing products.”
Alan writes further about #ukmfg’s appetite to invest here.
Unison – tube bending machines
In June, tube-bending machine manufacturer Unison moved premises a short distance to a new 2,200 m2 factory. Business for its all electric machines is growing, especially in core markets the US and Germany.
Turnover is expected to hit £10m by 2014 from £6m today – in 2009 it was about £3m. The Scarborough-based company now boasts and hosts the world’s largest all electric pipe bending machine. Its annual schools engagement event, Scarborough Engineering Week, is set to attract >1,600 school children, more info here.
Process data analysis software company Lanner had a good start to the year:
David Jones, CEO of Lanner, says: “Lanner’s business in UK manufacturing has been very positive in the first half of this year. Lanner has seen a growth in its specific UK related manufacturing revenues of over 11%. Defence, pharma and automotive sectors are doing well. We see a continuing positive outlook for the rest of the year”
[Autodesk was unable to provide figures because it is on a media purdah]
“Manufacturers have been forced to take a hard look at what they are offering and how they are delivering it and are embracing technology to optimise this,” says Tim Norman, director Northern Europe – Manufacturing at Autodesk.
“Simulation, modelling and analysis tools are enabling designers and Innovators to look at the long-term view of the entire design process. Assessing where savings can be made through: the use of different materials, changing an element of a design in the early stages or creating more efficient layouts in factories and development facilities to reduce downstream production costs.
“Technological innovations such cloud based-software and 3D printing are enabling smaller Manufacturers to compete through their agility of design helping to boost the industry. The UK has a long heritage of being a hub for innovation in manufacturing, and it is clearly doing the right things to ensure this continues.
Kronos, a developer of time and attendance management software systems
“Following today’s research from the Manufacturing Advisory Service, it’s encouraging to see there’s an appetite for investment in the UK manufacturing sector,” says Rob Hiron, manufacturing sector lead at Kronos.
“The spotlight is now shifting to growth and manufacturers need to adapt to the changing landscape. Dynamic manufacturers who develop an engaged workforce that puts innovation and growth at the forefront of their industries will be best placed to react to the changing marketplace. At Kronos we have seen a 26 per cent year on year increase in product bookings this quarter, including some great new name manufacturers.”
Sean Jackson, managing director of BSM, an ERP consultancy in Ireland says:
“We have experienced the number of sales and enquiries for ERP software in the first half of the year was higher year-on-year than the same period in 2012. We’re not seeing a rise at the moment because traditionally summer is quiet.
“It will be interesting to see whether the wave of investment these surveys forecast will affect the ERP market – I expect they will have to as ERP is integral to a growing company.”
Will Newton of SAP UK says:
“SME manufacturing is the strongest growth industry for SAP Business One in UKI, with all of them now wanting to invest into their company’s infrastructure, particularly in IT.“For many manufacturers, the decision to invest has been delayed for many years and now with the economy picking up and orders coming in, the demand is increasing even more.”
Festo Training and Consulting
Recent research carried out by Festo Training and Consulting found that 38% of manufacturing companies considered lack of management skills to be of great concern for their organisations.
Sixty two per cent felt that talent development and training were of high concern to their business and more than half of respondents felt that employee engagement, morale and motivation were of concern to their business.