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Despite a “brighter” global outlook, UK companies’ investment in new plants and machinery dropped over two years from 7.5% of turnover to 6.5% while European companies forged ahead with modern streamlining and productivity technology, the Annual Investment Monitor from manufacturers’ organisation EEF and bank Santander showed.
The surveyors blamed political uncertainty during Brexit negotiations for the slowdown. Cost, uncertainty around returns and the skills gap also explain international data showing UK investment in machinery and robots lagging behind, they added.
“The Monitor clearly highlights the need for businesses to invest more in automation,” said Paul Brooks, head of manufacturing at Santander. “We strongly encourage those firms that are holding back to focus their investment decisions on increased automation, which can lead to productivity gains.”
However, Brooks added it is “encouraging” that 51.1% of manufacturers intend to spend more on new machinery in the next two years.
Of the 328 businesses surveyed in August, two-thirds said Brexit has had some impact on their plans. 13% of the companies are not investing at all until there is further clarity on an exit deal.
The data shows that while some manufacturers might be investing to satisfy current plans or expand capacity, they are not investing in improving production capacity, the EEF said. The body said boosting investment and productivity should be at the forefront of the upcoming autumn budget.
“Manufacturers have navigated a panoply of demand-related challenges in recent years, which have taken a toll on the sector’s appetite and ability to invest,” said Lee Hopley, chief economist at the EEF. “With global demand on the up, conditions should be ripe for industry to make new investments in capacity and productivity enhancing technology. But Brexit means the future outlook for investment is not clear cut.”
The government must create an “ambitious” industrial strategy tackling barriers to investment head on and ensuring UK manufacturers can compete in future, he added.
The survey shows "deeply seated concern at the bedrock of the UK's business community," said Bernardine Adkins, head of EU trade and competition in law firm Gowling WLG's Brexit unit. The concern is now "compromising the investment decisions that would otherwise have maintained stable growth in the UK," she told Professional Engineering. "EU leaders, as well as the prime minister, must now recognise the shared benefit of accelerating negotiations towards a mutually beneficial outcome."
Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers.