07 June 2013

Manufacturers start to invest more

Research indicates small manufacturers are starting to invest more money in staff and new machinery.

A poll carried out by the Government’s Manufacturing Advisory Service (MAS) found small and start-up businesses in the manufacturing sector planned to take on extra staff over the next year as well as investing £20.2 billion in updating their equipment.

However, the survey discovered the firms were also struggling with falling margins, as well as finding it difficult to meet the deadlines set by their customers.

MAS quizzed 700 companies and found 48% were planning to spend money on new machinery or moving into new premises like the industrial units operated by Bizspace. Meanwhile 39% said they thought they would invest in buying or developing new technologies.

Both these figures are slightly higher than last year, indicating more manufacturers are willing and able to invest in their future. There was also an increase in the number of firms intending to hire staff over the next 12 months.

Pressure on profit margins

The poll also found that 52% of companies were turning away work due to the poor profit margins they were being quoted by potential clients.

Lorraine Holmes, Area Director for MAS in the North and West, says: “There appeared to be a greater appetite from SMEs for investment in order to remain competitive, and I think we are also seeing a desire to create jobs to meet expected demand.”

But she adds: “Poor profit margins and lead times both paint a potential picture of unrealistic customer expectations and it appears that manufacturers are favouring a more pragmatic approach to taking work on. An inability to meet design specification and issues with equipment capability were also quoted as possible barriers and this could underline the renewed desire for investment in new machinery and technology.”

Another piece of research found many small and start-up businesses were only investing in new equipment when faced with problems with their old machinery, rather than to improve production.

GE Capital, the finance arm of General Electric, said small and medium-sized manufacturers planned to spend £20.2 billion in the coming year.

But Ilaria del Beato, Chief Executive of GE Capital UK, said it is “telling that replacement rather than growth is the key driver”.