MAS Barometer – English manufacturing SMEs set to invest in capital equipment to meet demand

Posted on 19 Mar 2014 by Tim Brown

According to MAS Barometer

Small to medium sized manufacturers in England are set to embark on a major investment drive in order to meet expected new demand it has been revealed.

The latest Manufacturing Advisory Service (MAS) Barometer’s special focus revealed that 86% of respondents were planning to invest in capital equipment over the next twelve months, with companies looking to spend £121,000 on average.

With over 80,000* firms making up the English SME manufacturing community, this could equate to hundreds of £millions of fresh industry investment between now and 2015.

Two thirds of the firms questioned are looking to purchase new plant and machinery, just over half are focused on upgrading IT/communications infrastructure and nearly a third on improving premises.

The main reasons driving these investment plans were boosting efficiency and quality (31%), followed by developing new products/processes (30%) and extending existing capacity (22%).

Fewer than one in five companies (19%) said they planned to approach banks to fund capital equipment purchases in the next year, with manufacturers instead choosing to secure money via grants (27%) and the Regional Growth Fund (21%).

A record 864 SME manufacturers responded to the latest MAS Barometer, which provides an overview of economic conditions and issues faced by the sector during October to December 2013.

62% of companies reported an increase in sales over the last six months (a 6% rise on the last report), whilst over three quarters of businesses (76%) expect to boost sales between now and June 2014.

Business and Energy Minister, Michael Fallon, said:

“These figures point towards signs of a renaissance in manufacturing. SMEs are increasing in confidence, and looking to both recruit and invest.

“We’re committed to working closely with the manufacturing sector to provide a strong base for the recovery, and create growth for the future.”

Steven Barr, Head of MAS, continued: “There is a definite feel good factor around English manufacturing at the moment and these latest figures reinforce positive reports from the Society of Motor Manufacturers and Traders (SMMT) together with encouraging Purchasing Managers’ Index (PMI) data.

“Investment is crucial if we are going to take advantage of reshoring and predicted growth in markets such as offshore wind, renewables and low carbon vehicles.”

He continued: “Importantly, 6% of smaller businesses are looking to spend more than £500,000. This is a significant figure and proves that SMEs are prepared to invest ‘big’ in order to take advantage of opportunities presented by the upturn.

“The fact that more companies are applying for grants and the Regional Growth Fund means awareness of available support is rising and I’m encouraged that some firms are also using their own in-house funds (11%). This suggests manufacturers have been prudent through the recession and are trying to be more self-reliant when it comes to financing expansion.”

There were all time ‘highs’ across the entire range of performance indicators in this Barometer, but perhaps none more striking than the change in attitudes towards recruitment.

For the first time since the national Barometer launched in 2012, more than half (53%) of English manufacturers are expecting to take staff on over the next six months, marking a 14% rise on the previous report.

Steven continued: “The employment data makes for very interesting reading. Despite previous Barometers showing optimism in sales, investment and new technology, the number of firms planning to recruit has remained fairly consistent at around 40% over the past year.

“This was understood to be because companies were retaining staff during the slowdown in the hope that volumes would return. With so many firms confident of growth it could be that manufacturers are now looking to increase capability and capacity, or perhaps are looking to attract employees with different skills.

“The significant question now is do we have enough people to fill these positions or will it be a case of growing capability through apprenticeships and graduate recruitment?”

He concluded: “Our expert MAS Advisors are working with companies on their long-term strategies and skills is one of the biggest issues they are facing. We can help with planning recruitment policies and embedding skills, not to mention referring them to other relevant business support services.”

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