Confidence is king

Confidence breeds confidence Confidence, that most elusive of qualities, is once again coursing through UK manufacturing. What began as tentative optimism earlier this year looks set to blossom into something more momentous in 2011, according to WM's Manufacturing Outlook research. Nearly 60% of manufacturers plan to increase business investment as optimism begins to prevail across the sector. Almost a third plan to boost outlays on sites and services by 10-20% in a nod to brighter trading conditions. And the bullish mood appears universal with respondents from sectors as diverse as automotive to bricks, pottery and glass plants, all intending to inject fresh cash into their sites next year. New plant is near the top of the shopping list, according to our findings. Condition monitoring, boilers, compressors and the like were the most popular area of spend for firms looking to boost investment by more than 20% next year. However, IT systems were the overall most popular investment choice, with two in ten manufacturers planning to increase spending on technology by up to 9% on this year's levels. The results reinforce the conclusion that manufacturing firms have a spring in their step. They are seeking new equipment to help them keep pace with brimming order books and cutting edge IT to keep on top of the stresses and strains caused by the renewed activity. The feelgood factor is proving infectious. Seven in ten senior site staff voiced optimism about the business outlook for 2011 - that's soared 15% from the same time 12 months ago. Heading into 2010, the pessimists outnumbered the optimists by two to one. Fast forward a year and there are four times as many manufacturers who are very optimistic rather than very pessimistic about the year ahead. All that positivity is rubbing off on manufacturing managers and directors. Over 70% rated their morale as on the up heading into 2011, according to WM's findings. Nearly three in ten said they loved the job and are raring to get back to the site next year. Get set for plenty of group hugs in the coming 12 months. Don't mention the double dipper The double dipper sounds like a seat-of-your-pants rollercoaster ride. In fact, it's the term economists apply when an economy suffers a recession followed by brief growth only to sink back into a second recession. Manufacturers are turning white at the prospect of riding such a monster next year. Respondents cited a double dip recession as the biggest perceived threat to their business in 2011. International competition was classed as the second biggest concern, with that perennial problem of a lack of skilled staff completing the top three. Fourth on the worry list were problems securing new finance. Despite the surge in confidence at manufacturing sites, many don't anticipate sourcing finance to become any easier. Over 60% of respondents predicted no change in the level of scrutiny applied by lenders in 2011. Not a single manufacturer expects the banks to lend far more freely, but nearly two in ten say there will be a slight easing. At the other extreme around 5% of respondents predicted a year where getting hold of fresh finance will be tougher than ever. The limited expectations for bank lending come despite the fact that most respondents aim to invest more heavily in their sites next year. Presumably the investments are being funded by existing agreements or established cash reserves. Productivity the no 1 priority Improving productivity is now the top priority for UK manufacturers. The pursuit of lean and other efficiency efforts has toppled cost control as the dominant focus at sites since our last Outlook survey one year ago. The quest to harness productivity also topped the list of biggest workforce management challenges. Up-skilling staff, multi-skilling and fostering innovation were all in the top four. Firms appear to be committed to investing in staff as they bid to maximise site efficiency. Profit growth has also risen up the priority pecking order since last year's Outlook survey, rising from 6th to 3rd most pressing target. Again, the findings point to a sector which is on the front foot. Firms have gone from being focused on inward-looking cost control to a more expansive outlook around growing business. Workforces set to expand Manufacturers are set to boost their staff numbers in 2011, with almost half planning to recruit extra workers in the coming 12 months. Just 15% anticipate a cull in headcount in 2011 - that's down by 50% from the same time last year. Of those looking to take on staff, the majority plans marginal increases in workforce size of up to 5%. Nearly 40% of firms feel staff numbers won't change next year. 2011 looks set to continue a dramatic turnaround in employment levels recorded in 2010. Just over 40% of firms reported a rise in staff numbers this past year compared to only 11% who grew headcount in 2009. Booming export demand is one factor behind the reversal. A weak pound has helped UK firms conquer Europe and beyond during 2010, and just over half of our respondents expect that demand to grow next year. A quarter say exports will continue at current levels, with just 7% anticipating a drop off in trade. Europe will drive the demand for UK manufactured goods, companies predict. Asia is the second most lucrative export destination, respondents say. WM will be bringing together industry leaders and frontline site managers to debate the findings of this Outlook survey. See next month's issue for a full report of the event. Download the PDF for the full report.