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Manufacturing SMEs set to ‘invest in equipment to meet demand’

Date Added: 06/03/2014  

Small to medium-sized businesses (SMEs) in the UK’s manufacturing industry are poised to invest in capital equipment needed to meet demand over the next year, according to a new survey.

The latest Manufacturing Advisory Service (MAS) Barometer special focus showed that 86 per cent of participants intended to invest in capital equipment over the next 12 months, with SMEs considering spending around £121,000 on average.

According to MAS, the UK’s SME manufacturing community is made up of over 80,000 businesses, which means that this could amount to millions of pounds worth of fresh industry investment between now and 2015. 

Two thirds of the companies interviewed are planning to purchase new plant machinery, over 50 per cent are concentrating on upgrading their IT infrastructure and nearly a third are focusing in improving their current premises.

The MAS survey revealed the motivations behind manufacturing SMEs' investment plans, with 31 per cent wanting to boost efficiency, 30 per cent wishing to develop new products and 22 per cent looking to extend existing capacity.

In terms of funding, fewer than 20 per cent of those interviewed intend to approach banks to fund capital equipment purchases in the next year. Instead, SMEs from within this sector are opting to secure money through grants and the Regional Growth Fund (RGF).

According to the government, the RGF is a £3.2 billion fund, helping companies throughout England to create jobs between now and the mid-2020s.

These figures correspond with research carried out by KPMG, which demonstrated that SMEs would rather draw on their own cash reserves rather than applying for finance through a bank.

Further evidence of this trend can be found in figures released by the Bank of England on Monday (March 3rd). According to this research, net lending through the Funding for Lending scheme declined by £1.3billion in Q2 to Q4 of 2013. This means that SMEs in the manufacturing sector are able to grow and flourish without the help of banks - whose lending behaviour is currently being investigated by a governmental committee.  

Business and energy minister Michael Fallon, said: "These figures point towards signs of a renaissance in manufacturing. SMEs are increasing in confidence, and looking to both recruit and invest.”

Steven Barr, head of MAS, added that investment was crucial if the industry is to take advantage of reshoring and the predicted growth in markets such as offshore wind, renewables and low carbon vehicles.

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