Manufacturers favour investment in their business rather than export growth

MANUFACTURERS are set to ramp up their investment spend despite the hostile economic environment, although speculative attempts to break new export markets remain some distance away, new research suggests.

Barclays has questioned UK manufacturers on their attitudes and intentions towards investment and export growth. The bank found that while 84% of firms thought business conditions were difficult, this was not deterring manufacturers from investing in their businesses.

Over half of respondents (54%) will be increasing investment spend over the next 12 months, while only 20% envisaged cutting back.  Barclays said these current investment intentions were “robustly underpinned by both historic and longer term intentions”.

It said looking back over the past five years more than two thirds (67%) of firms had been steadily increasing their levels of investment and a similar number (62%) planned on continuing to do so over the next five years.

When asked what kind of investments they would be making over the next year, the greatest focus will be on new machinery and machine tools (63%) followed by new product development (62%). Almost half (49%) will be upgrading their factory fixtures and fittings while 42% will be putting new investment behind research and development; however only 30% will be using investment funds to help them enter  new markets.

Of those surveyed, 45% said less than a quarter of their total sales currently come from exports, and only 35% see international trade growing beyond a quarter of their sales by 2018. Regardless of the extent to which they were exporters, most have been selling abroad for a long time – 62% have been exporting for over 15 years. Only 3% have started exporting in the last two years, therefore showing that those who export have been doing so for at least a decade but have little appetite to look at new markets.  

This will do little to help the government’s ambitions to balance the trade deficit, it said.

Ray O’Donoghue, Managing Director at Barclays in the Midlands said: “Whilst it’s a tough environment today for UK manufacturers, the survey results show they are in this for the long-run, committed to increased investment to make sure they are in the best possible shape when we come out of recession, and showing that there is confidence in long-term profitability.

“However whilst businesses are ring-fencing cash for new machinery and upgrading factory fittings which are familiar areas that offer secure returns, there’s less appetite for more speculative attempts to grow exports in a far flung market even with the lure of higher returns. Manufacturers appear to still have some reservations about investing in new faster growing markets to try to increase sales, instead they are still focused on the quick wins that cost cutting can bring to the bottom line.”