SMEs planning to invest £141bn in manufacturing equipment

Posted on 30 May 2013 by Tim Brown

Investment in manufacturing equipment and commercial vehicles assets is set to drive capital expenditure across the UK, Germany, France and Italy, according to GE Capital’s Q1 2013 European SME Capex Barometer.

The research shows that nearly half (46%) of the €364 billion in total capital expenditure that SMEs in the four big economies are planning over the next 12 months – equating to €165.8bn – is earmarked for manufacturing equipment assets. This is an increase of 47% on Q3 2012.

Within this, German SMEs are planning to spend €76.5bn, higher than each of the other markets’ intended spend on manufacturing assets. UK SMEs are still playing catch up against their SME counterparts with investment in the segment planned at €23bn.

The findings highlight a broader trend of increasing confidence amongst SMEs operating in the manufacturing sector. The data show that across the combined economies of the UK, Germany, France and Italy, SMEs in the manufacturing sector saw net confidence jump to 25% in Q1 2013 from -4% in Q3 2012. This represents the biggest swing in positive sentiment across all sectors, although SMEs in the business & financial services (29%) and utilities & transport (26%) sectors remain slightly more positive.

Based on their responses, SMEs in this sector are most likely to increase spend to build capacity to service growth in new orders than any other sector. This was the primary reason for 41% of respondents, compared with 32% in the retail services sector and 29% in business & financial services.

“It’s very encouraging to see that SME leaders in the manufacturing sector are posting a big jump in confidence,” said Christian Bernhard Head of New Relationship Development EMEA at GE Capital. “We believe this improvement in sentiment will be translated into critical investment in the coming year, to help drive the industry towards a sustainable path to growth.”

However, SME manufacturers are also among those who are most concerned about the continued uncertain economic environment with nearly half (45%) of respondents citing this as the single main barrier to investment.

Other key findings include:

  • Expanding the workforce continues to be a top priority for the next 12 months, as UK SMEs plan to create over 525,000 new full-time jobs (up 16% from the last survey)
  • The main focus of capex investment in the coming year is manufacturing equipment (£20.2bn, up 38% compared to when the survey was last completed in Q3 2012) and commercial vehicles (£16.7bn, up 106% on Q3 2012)
  • Investment in IT equipment has fallen back to £11.2bn, down 36% on Q3 2012, but still up 5% on the Q1 2012 survey
  • Overall net confidence amongst UK SMEs is at 33% with more than half of respondents feeling positive (52% vs. 19% negative)
  • The UK is still playing catch up to Germany and Italy. The research indicates that German SMEs plan to invest over £139bn in the next 12 months, an increase of 59% on Q3 2012. Italian SMEs now plan to spend over £67bn, up 13% on Q3 2012.

Download the full report here.