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High-tech on a high

19 January 2011

New research from GE suggests that the UK high tech manufacturing sector is not only forging ahead but is also strongly confident about prospects for 2011. However, there is a downside; of the 400 senior executives polled for the first GE High Tech Manufacturing Index, the great majority expressed concerns on other issues, particularly access to capital and raw materials. Over a third of those seeking capital describe funds as being ‘impossible to obtain on acceptable terms’. High operating and raw material costs, moreover, were cited as significant barriers to growth.

Nevertheless, GE’s UK president and chief executive officer Mark Elborne believes the research has identified a vibrant and positive sector that can help revitalise the UK economy over the next few years. “Many of those surveyed had a positive 2010 and feel confident about 2011, particularly when discussing the potential in export markets,” he says. And this sentiment is borne out by the survey results. Those interviewed were far more likely to say that the current position of their business is positive (75%) rather than negative (7%).

When asked what they saw as the main areas of opportunity for their business, the buoyancy of some global markets was cited as the main reason, with 23% saying export to global markets provided the biggest opportunities. Some 13% said it was general overall demand for their products and services, while 11% cited new technologies and innovations as providing strong opportunities for them.

There is good news too from this sector on the recruitment front. A positive balance of 44% expects employee numbers to increase over the next 12 months, with the average increase in headcount estimated to be 5.7%. These businesses are also very active internationally with over eight in ten (82%) seeing at least some of their revenue derived from exports.

Nearly half (46%) of exporters have seen the proportion of turnover accounted for by exports increase with an average uplift of 9.6%. Meanwhile, almost two-thirds (62%) of exporters foresee an increase in the value of international orders with an average rise of 12.3%. Half (50%) predict that orders from UK customers will increase in 2011, with less than one in ten (8%) expecting a decline. Although the average predicted increase of 5.8% exceeds forecasts for the UK economy as a whole, this is only about half the growth envisaged for international orders.

While providing a very positive picture overall, there is the sense that things could be better. Many of the businesses participating in GE’s survey are small (as small as ten employees in some cases) and companies of this size have been hit badly by the credit shortage. Among those ‘in the market’ for capital, almost three times as many (37%) regard the terms on offer as being “unacceptably strict”, or that capital is “impossible to obtain” than consider it to be “readily available” (13%). If this sector is to help drag the economy of the doldrums, as GE’s research leads us to believe, it must have the wherewithal to achieve it. So perhaps those banks currently in majority public ownership should be leaned upon more heavily - and certainly before interest rates start to rise.

Les Hunt

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