Senior leaders in the manufacturing sector are banking on growth, with the sector ready to invest and innovate to drive the industry’s expansion over the next five years, according to a report published today.
Lloyds Bank Commercial Banking’s Business in Britain report surveyed 200 of the country’s largest manufacturers with a turnover of £50m or more and found almost four in five (79%) forecast their turnover will increase over the next five years, and by an average of 12%.
Among exporters – 93% of those businesses surveyed – more than half (55%) said demand from overseas buyers was growing, while just a sixth (16%) said it was declining.
Even amid uncertainty over the UK leaving the EU, a third (33%) of manufacturers said the EU would remain their most important growth market for the next five years, followed by China (15%) and North America (13%).
But almost half (47%) of firms said the impact of the UK leaving the EU is a threat to growth and is a greater threat to growth than cost pressures (45%), political uncertainty (44%) or weak growth in the UK economy (43%).
A significant number (60%) say their strategy includes boosting research and development budgets, which they plan to increase by an average of 13%.
Nearly half (49%) believe new product development will power their growth, alongside investments in IT (30%), new equipment (24%) and increasing capacity (22%).
A fifth (20%) believe improving productivity will support their expansion, together with investing in their existing product range (20%) and entering new export markets (18%).
Steve Harris, Head of Manufacturing for Large Corporates at Lloyds Bank Commercial Banking, said: “Manufacturing is a significant part of the UK economy – it represents 10% of economic output, 70% of all business research and development spend, and directly employs 2.7 million*. UK manufacturers have a proud history of high-quality products and innovation, which could be one of the reasons for the growing demand from overseas.”
A sustainable future
Sustainability sits at the heart of modern manufacturers’ strategies, with two thirds (67%) saying they will invest in sustainability in the next two years.
They will do that by reducing waste or recycling more (50%), cutting their energy use (44%), encouraging office employees to reduce energy use (43%), changing manufacturing materials or processes (31%), sustainable procurement (26%), cutting back on travel (25%) and making distribution fleets greener (22%).
Steve added: “Sustainability is not just a buzz word, it’s a social expectation and a reality for businesses today. Whilst this could be seen as a challenge for manufacturers, they’re seeing it as a real growth opportunity and are grabbing it with both hands.
“Their commitment to capitalising on opportunities that exist in a modern global economy must be recognised, and it reaffirms why we are committed to supporting manufacturers with the resource and expertise they need to grow their business.”
Lloyds Bank Commercial Banking supports UK manufacturing skills with its £1million-a-year sponsorship of the Manufacturing Technology Centre in Coventry. The centre will create around 3,500 manufacturing apprentices, graduates and engineers by 2024. The bank has committed to investing up to £3 billion in the UK manufacturing sector in the three years to 2020 as part of its Helping Britain Prosper plan.
* House of Commons Library Briefing Paper – Manufacturing: Statistics and Policy https://researchbriefings.files.parliament.uk/documents/SN01942/SN01942.pdf