Fears over investment in capital expenditure08 September 2014

Britain's manufacturers are stepping up their expenditure on a wider range of more sophisticated investments to determine their business strategies, according to a report published today by EEF, the manufacturers' organisation and Lombard Asset Finance.

In addition to investing, on average, £1 million annually on plant and machinery, the report revealed that companies were increasing essential and complementary investment in 'intangibles' such as staff training, recruitment, R&D, software and marketing in order to derive a competitive advantage.

However the report, which will be the first in a series tracking investment trends also showed that, despite most companies saying they planned to maintain or increase their expenditure on new plant and machinery in the next two years, this was only at moderate levels and, mainly to replace obsolete technology.

EEF said: "A significant number of companies also continue to face hurdles to raising levels of investment citing uncertain demand and, for smaller companies in particular, access to internal and external finance. "

EEF chief economist Ms Lee Hopley added: "Making progress towards better balanced growth remains a top economic priority and investment by manufacturers is and, must continue to be, a contributor to this process. Conditions have been aligning to support more investment with companies reporting revenue growth, improved profitability and improving confidence. Manufacturers are also facing increasingly complex decisions on how to spread their resource across a range of business priorities.

"However, we're not yet seeing the step change in investment plans we need. Plans continue to be held back by uncertainty, resources and factors that tilt the decision in favour of other locations. The planned growth in investment in a range of business areas is welcome, but industry and government policies need to be striving for more."

EEF said raising the UK's level of investment would be essential to tackle "its longstanding position as an underperformer compared to competitors".

"In terms of the share of GDP accounted for by capital expenditure, despite levels falling across most of the developed world the UK share stood at 13% in 2013 compared to the EU28 and OECD average of 18%."

Investment in plant and machinery was undertaken by over 95% of manufacturers in the survey in the past two years, with investment levels averaging £1m. One in three companies said they planned to invest the same on plant and machinery over the next two years as they did in the previous two, although these spending plans were moderate in scale.

Ian Vallely

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