EAMA - Engineering & Machinery Alliance      

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

EAMA - Engineering & Machinery Alliance
home Mechanical Engineering Media Library Policy Documents
Publications
EAMA Membership Member's links Contact EAMA

 

EAMA - Engineering & Machinery Alliance Press Release

Monday 28 February 2005

 

UK manufacturers plans threatened by regional grants
SME manufacturers' investment survey sets tone for Budget submission

 

Old habits may die hard, but UK SME manufacturers, helped by a big increase in property values, are adapting to international competition from low cost employment countries like China according to a new survey by the Engineering and Machinery Alliance (EAMA).

Businesses see sales opportunities overseas, and want to invest to win market share there, as the best way to grow now that the UK market is relatively small in world terms. Some are already reporting business returning to the UK from the Far East.

However, EAMA warns that these advances based on sound investment strategies, developed by well-run companies are threatened by the UK's approach to regional grants.

Graham Hayes, EAMA's chairman: "The UK is simply too small for regional funding not to be anti-competitive for some companies based in other regions serving the same customers."

Typical of the survey, the managing director of a component manufacturers in the South East said: "If there's one thing that Government could do, it would be to give all companies investing in new technology proper financial incentives, where-ever they are located and do away with these regional grant schemes. … If a competitor gets support that enables him to collapse a five-year investment scheme into two-and-a-half years in one part of the UK, how can we compete with that?"

According to Investment Property Databank's 2004 index, industrial property returns grew 12% annually over the five years to 2003, with income averaging 8.3% and capital values 4% growth, which is better than the retail and office sectors. EAMA says its manufacturing members have found it easier to get finance for investment because this increase in industrial property values means that firms can offer banks bigger cover of their loans for high tech investment, training and IT.

Summarising the survey's conclusions, EAMA observes that all the companies had a better year in 2004 than in 2003, and most had invested heavily in at least one of the last five years.

Graham Hayes: "Most companies remain fairly bullish about the first half of 2005 but are much less confident about the second, with most putting further investment on hold, until they are confident that business demand will remain positive and that there will be no nasty post election tax shock. And it's still just too much for SMEs, with all the other things that they have to attend to in terms of new regulations, to keep up with the ever-changing sources of finance, tax breaks, and how and where to apply for them.

"We believe that Government could make better use of trade associations to publicise that sort of thing to their members, particularly SMEs."

Along with what is mostly good feedback on initiatives like the R&D Tax Credit, the survey records little change in manufacturers perceptions of Government's policy and the banks attitudes to manufacturing.

Government doesn't have a big influence on SME investment policy at the moment, because in the words of one respondent: "Government doesn't understand that the future of the country should have manufacturing deeply embedded in it. When it does, its policies will have a positive impact on our operations and policies."

Apart from the increase in property values, few companies had seen an improvement in the UK banks' traditional approach to manufacturing, with on the other hand respondents from companies of all sizes saying that they used cash to finance investment, which of course reduces their recorded profits line.

EAMA decided to undertake the survey in December last year after the Government released figures showing that manufacturing investment fell 37% between 1998 and 2003, the last full year for which data is available. Graham Hayes: "We felt that the facts behind the data needed to be explored, before we made our recommendations to the Chancellor."

(ends)

Notes to Editors:

  1. ONS Annual Business Inquiry December 2004

    Year
    Turnover
    GVA
    Employment
    Capital Expenditure
    £ million
    £ million
    Thousand
    £ million
    1995
    425,963
    139,927
     
    18,136
    1996
    450,177
    144,001
     
    18,565
    1997
    469,787
    148,927
     
    20,314
    1998
    460,677
    149,892
    4,416
    20,386
    1999
    461,771
    150,449
    4,269
    18,125
    2000
    469,146
    148,793
    4,143
    17,004
    2001
    461,898
    145,230
    3,969
    16,278
    2002
    450,137
    144,227
    3,762
    13,596
    2003
    447,547
    143,313
    3,534
    12,840

  2. The interview texts are available on request (tel 020 7298 6450, e-mail eama@mta.org.uk)

  3. EAMA's six member associations are: British Automation and Robot Association (BARA), British Turned Part Manufacturers Association (BTMA), Gauge and Toolmakers Association (GTMA), Manufacturing Technologies Association (MTA), Printing, Papermaking and Converting Suppliers Association (PICON), Processing and Packaging Machinery Association (PPMA)