UK High Tech Manufacturers Stay Confident Amidst Eurozone Crisis

News provided by

GE

16 Jul, 2012, 06:00 GMT

LONDON, July 16, 2012 /PRNewswire/ --

  • Uncertainty over UK economic outlook remains
  • Focus shifting to opportunities in new & emerging markets
  • Ability to hire experienced engineers still an issue

The UK high tech manufacturing sector is still cautiously optimistic about its future, despite a largely undecided outlook on the general economy and amidst growing uncertainty in the Eurozone, according to a new survey.

77% of the 402 high tech manufacturers questioned for the fourth wave of the GE High Tech Index in June 2012 said that they felt either very positive (31%) or fairly positive (46%) about the current performance of their own business. This represents a slight improvement in sentiment since the last high tech survey in December 2011 when 73% of those questioned indicated they were either very positive or fairly positive about their own business prospects.

Nearly half of the high tech manufacturers questioned said the Eurozone crisis was leading them to focus more new business efforts on developing markets, while 42% of said the Eurozone crisis meant they were also placing more attention and effort on the UK market.

Engineering skills shortages were also highlighted in the survey with almost two-thirds (65%) of those who had been recruiting engineers over the last 12 months saying that they had had difficulty recruiting the right engineering staff, particularly for mid-level or senior positions.  Many businesses are focusing on retraining existing employees or new recruits as a way to plug skills gaps.

Future prospects and UK economy

In terms of future prospects there was significant optimism.  68% of those high tech manufacturers questioned said they expected the performance of their business to either be a lot better (18%) or a little better (50%) in the next year while just 8% expect conditions to worsen.

However, the high tech manufacturers questioned were less optimistic about the UK economy in general - though more positive about the general economic outlook than in December 2011 when confidence in the general economy amongst those surveyed was very low.  In the latest survey 25% of those questioned said they were either very positive (6%) or fairly positive (19%) about the current economic situation with 73% saying they had either a neutral (39%) or negative (34%) outlook.   In the previous December 2011 just 4% said they were very positive about economic conditions and 11% saying they were fairly positive.    

Over the next 12 months, the net percentage of respondents expecting to see the UK economy improve is 2%, but the figure for conditions for UK High Tech manufacturing is 30%. Those who think the performance of their own business will get better are even higher, at a net score of 60%. Reasons for this are cited as increased exports (23%), more customer inquiries, orders or new business (18%), and new products or research and development (16%).

Compared to figures in previous surveys, 69% of respondents expect their business to grow in 2012 - over a quarter (26%) by over 10%. Only 8% expected their business to shrink in 2012, compared to 2011. There is a clear trend that the majority of respondents perceive the current market and business environment to be improving when compared to the situation last year.

GE UK CEO Mark Elborne commented: "UK high tech manufacturers are showing extraordinary determination and resilience in the face of uncertain economic times in the general economy. The survey suggests that the Eurozone crisis has not had a major impact on their businesses so far, but it also highlights the measures they are taking - such as focussing on emerging markets, and sourcing materials from the UK, to ensure that they are able to weather the storm."  

Influence of Events

A number of events and circumstances in the first half of 2012 have had an impact on the business environment. Respondents to the survey cited high raw material costs (76%), rising energy costs (66%), and uncertainty in the Eurozone (55%) as the most critical factors with a negative impact.

Conversely, the continued strong growth rates in many emerging economies (40%), low UK interest rates (39%), and the value of sterling (28%), were cited as positive influences on performance.

Nearly half of the high tech manufacturers questioned said the Eurozone crisis was leading them to focus more new business efforts on developing markets, while 42% of said the Eurozone crisis meant they were also placing more attention and effort on the UK market.  

More than a third also said they were approaching business in the Eurozone with more caution.  A third of those questioned said the Eurozone situation also meant they were sourcing more materials locally in the UK.  

Bank Funding

Access to bank funding remains an issue in the UK high tech manufacturing sector, only 16% of respondents feel that bank funding is plentiful or readily available, with 9% believing that it is impossible to obtain. 16% feel it is available but on unacceptably onerous terms, and 28% feel that it is available but on fairly onerous terms.

Employment/Skills

The positive outlook shown by many of the respondents on the sector is reflected in the number of businesses looking to increase staffing levels over the next 12 months. Over half of respondents (54%) said they would be looking at doing this - though of these respondents 74% said they would only be increasing levels by 1-10%.

Significantly, almost two-thirds (65%) of those who had been recruiting engineers over the last 12 months said that they had had difficulty recruiting the right engineering staff. The most difficulty when hiring engineers was found when filling either mid-level or senior positions.

Mid-level engineers (defined as those with 5-10 years' experience), are posing the greatest problem with 90% for whom it was relevant finding it difficult to recruit at this level. Across specialisms, mechanical engineers (29%), electrical engineers (25%) and general engineers (21%) were the most difficult to recruit.

According to the survey UK high tech manufacturers are taking several different approaches to address the current engineering skills shortage. 71% of businesses are retraining existing employees, 56% are encouraging apprenticeships and 53% are retraining new hires. Only 39% of businesses are paying higher wages to overcome the shortage.

Promoting engineering is overwhelmingly the most popular choice for improving the skills shortage - 94% of respondents believe that this would have a positive effect, with 86% supporting an increase in science and maths education in schools.

Mark Elborne added: "To make sure that the high tech manufacturing industry remains a leading player in the development of the UK's economy, we must provide the right business conditions for this sector to continue to grow. This includes providing better access to finance and promoting engineering as a successful career choice to the next generation."

Survey Details:

Every six months, GE undertakes a survey of senior executives working in the UK High Tech manufacturing sector.  The first survey took place in Winter 2010, and was repeated in Summer 2011, and in Winter 2011.  This report provides an update into the state of the sector six months later.

ORB International conducted a survey of 402 senior decision makers in UK High Tech businesses between 31st May and 15th June 2012.  All businesses had at least 10 employees, and they were defined as High Tech on the basis that they:

  • To at least some degree "use a high level of design or scientific skills to produce technologically complex products and processes - usually of a high value";
  • Are a primary manufacturer of components, equipment or products rather than an assembler of components that are sourced entirely from external suppliers;
  • Are characterised by at least three of the following attributes:
    • Has a highly skilled workforce
    • Produces technically complex (Hi-Tech) products
    • Uses advanced, innovative or cutting-edge technology to produce its products
    • Produces products with a high added-value
    • Utilises a high level of design, innovation or creativity
    • Makes extensive use of computer, high-precision and information technologies
    • Engages in a large amount of Research & Development (R&D)
    • Has high levels of productivity i.e. not necessarily high volume but efficient production processes / high value of output per employee etc
    • Provides consultancy and/ or advisory services in relation to its products

The research was conducted over the telephone, using computer-aided telephone interviewing (CATI) methodology.  Respondents included175 companies that had participated in previous waves of this survey in addition to 277 newly recruited respondents.

Companies questioned manufactured a wide range of hi-tech components and products - for example, medical instruments and devices, laser optics, industrial sensing equipment, specialist telecoms equipment, industrial ceramics, precision components, aviation controls and components, engineering cutting tools, industrial and specialist gases.

About GE in the UK

GE has been operating in the UK since the 1930s.  Today our 18,000 employees serve the energy, oil & gas, healthcare, aerospace and financial industries.  We have a strong and continuing commitment to the UK economy, having invested £13bn in our British businesses since 2001.  From our 60 major locations, including 25 world-class manufacturing and R&D facilities, we deliver high-tech innovative solutions to the global marketplace.  Our locations include London, Aberdeen, Amersham, Cardiff, Cheltenham, Leicester, Nailsea and Southampton.

About GE

GE (NYSE: GE) works on things that matter. The best people and the best technologies taking on the toughest challenges. Finding solutions in energy, health and home, transportation and finance. Building, powering, moving and curing the world. Not just imagining. Doing. GE works. For more information, visit the company's website at http://www.ge.com.

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