UK manufacturers ploughing investment cash back into businesses

UK manufacturers will be ramping up their investment spend, despite the hostile economic environment, according to new research from Barclays.

However, Barclays said more speculative attempts to break new export markets are less attractive.

The survey questioned UK manufacturers on their attitudes and intentions towards investment and export growth, finding that while more than eight in 10 (84%) found business conditions to be difficult, the tough economic environment seemed not to deter manufacturers from investing in their businesses.

Over half of respondents (54%) said they will be increasing investment spend over the next 12 months, while only 20% envisaged cutting back. Looking back over the past five years more than two thirds (67%) of firms have been steadily increasing their levels of investment and a similar number (62%) plan on continuing to do so over the next five years.

Businesses said the greatest focus will be on new machinery and machine tools (63%) followed by new product development (62%). Almost half (49%) said they will be upgrading their factory fixtures and fittings while more than four in 10 (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% state that 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 2 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.

Michael Hartig, head of manufacturing at Barclays Northern region, 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.”