Annual manufacturing report shows increased investment as confidence returns to the sector
Over half of manufacturers (58%) invested more in machinery/machine tools in the last financial year than they did the previous year, according to the latest Annual Manufacturing Report (AMR). Only 5% of respondents in the report, which surveys over 100 manufacturers each year and is produced by The Manufacturer magazine in association with Barclays, said they were investing less in machinery/machine tools with the remaining 37% at the same level as last year.
The high number of businesses investing in this area, which also includes new production facilities, further underlines the growing confidence we’re currently seeing in the manufacturing sector. Over two-fifths (42%) of manufacturers are investing more in new product development than they were 12 months ago, with another 42% investing the same and only 5% investing less than at the same time last year.
With optimism returning to the sector, access to working capital has become an increasing focus for manufacturers over the past 12 months. This year’s results show the largest emphasis on increasing cashflow out of all of the last five years of this report. Over half (53%) of manufacturers’ primary financial objective over the year has been to increase cashflow.
Another report high is seen in the percentage of manufacturers organising capital investments strategically as opposed to replacement. This year has produced the most positive response to this question since the survey began in 2008 with all respondents seeing at least one quarter of their investments as strategic. This increase underlines the rising confidence in investing in longer-term assets as well as further reflecting the uptick in machine tool expenditure already highlighted in this release.
Mike Rigby, head of manufacturing at Barclays, said: “This year’s report further underlines the improving confidence in the manufacturing sector. More access to capital, investment in machine tools and new product development would strongly indicate growing order books and a strong desire for increased production capacity.”
Looking forward, the AMR reports that the positive improvement in appetite to invest will continue over next year with over two-thirds of respondents looking to increase their expenditure on capital goods. Almost nine in ten businesses (88%) surveyed intend to invest either the same or more in new product development in 2014, rising to 90% when looking ahead for the next five years.
Encouragingly, the report indicates that many manufacturers are now looking to take advantage of the global market place. Over the past year, there has been a marked increase in the number of manufacturers carrying out offshore activity with almost a third of respondents (32%) conducting over 40% of their business offshore (2012: 19%) while just over one-fifth (22%) carry out between 10 and 30% of their business offshore.
Mike Rigby, head of manufacturing at Barclays, added: “It is good to see a marked increase on last year in the number of manufacturers taking advantage of globalised markets and conducting their business offshore. From discussions with our own clients, we do see a particular inclination to export to markets which are closer to home, particularly the Eurozone but as manufacturers look to develop export strategies, it is important for them to also venture further afield to faster growing emerging market economies.”
Summing up this year’s annual manufacturing report, Tim Brown, report editor at The Manufacturer magazine, said: “While the growth in optimism in industry was certainly tangible in this year’s report, as has been the case over the last decade, the skills agenda remains a top concern for manufacturers. Many companies feel that there is not enough being done to make manufacturing an attractive career choice and, while attracting staff is a continued issue, the risk of losing trained staff to other sectors was also highlighted as a cause for concern.
“Positively, many companies report that they are actively tackling the issue of skills by hiring young talent as well as by utilising new IT initiatives and automation to help improve productivity and quality.
“The overall results of this report demonstrate that the outlook for manufacturing in 2014 looks positive. We would hope that this means a strengthened overall economic outlook, a continued increase in government support for the sector, and a greater public profile in terms of the career prospects offered by the sector.”