38 manufacturing survey


Taking a closer look at the SME manufacturing and engineering sector


Leading accountancy firm MHA MacIntyre Hudson has published its third annual Manufacturing & Engineering Survey, with input from leading economics expert, Professor Joe Nellis (Cranfield University) and Philippa Oldham (The Institution of Mechanical Engineers)


Key findings 8% 34% 21% Business growth in 2013 37% 2% 6% Predictions for growth in 2014 51% 41%


Contract Flat (0% growth) Low to moderate (under 10% growth) Moderate to high (10% plus growth)


Contracted Flat (0% growth) Low to moderate (under 10% growth) Moderate to high (10% plus growth)


• Optimism is high; 92% predict growth over the next 12 months and 51% anticipate an increase of over 10%.


• 62% expect staff numbers to increase and 64% intend to take on apprentices. The skills gap is a key concern.


• 86% intend to invest in R&D this year. Of those who applied for the R&D Tax Credit Scheme in the past 12 months, none reported an unsuccessful outcome.


• 58% feel unable to pass on cost increases, reflecting a cautious approach to economic recovery. • 36% are concerned about meeting future costs of pension auto-enrolment.


• Support from banks is improving, with 72% reporting adequate funding arrangements and 88% gaining approval for their funding requests.


Research & Development


Specialist R&D tax partner, Patrick King, commented: “Encouragingly, the majority of respondents (85%) in the Thames Valley are already investing in research and development (R&D), compared with less than half last year. This is in keeping with national statistics, suggesting 86% expect to invest in R&D in 2014. Surprisingly, despite the fact the overwhelming majority already invest in R&D, just 20% have claimed R&D tax credits. This is even more surprising when you consider that of those who have applied, 100% have been successful.


There are still many misconceptions surrounding what qualifies for R&D tax credits and how difficult it is to claim. The reality is that while there are rules to follow, the Government is very much pushing R&D and there is a real willingness at HMRC to


help if they can. With good professional guidance, most firms carrying out R&D could well qualify for the relief.


The Patent Box regime further encourages innovative businesses with a headline 10% tax rate. Again, while not straight forward, it is supported by the Government and HMRC. This relief is designed to work in tandem with R&D relief so the two together can provide a significant cashflow benefit by reducing CT costs. However, despite coming into effect just over a year ago, 50% of companies surveyed still aren’t aware of the Patent Box regime. More companies must take advantage of this government support.”


5%


Excluding apprentices or trainees do you anticipate your staff numbers will:


33% 62%


Decrease Increase Remain the same


7% 6%


For those indicating an increase which category would you expect most new staff to fall into?


87% 6% 35% 0 1 to 3 54% 5%


4 to 6 More than 6


Administrative staff Managerial staff Production staff


Employment


The positive expectations for growth are reflected in plans for recruitment. The majority of respondents, 62%, anticipate an increase in staff, with only 5% expecting their staff numbers to decrease. For those looking to increase, the overwhelming majority, 87%, expect to take on more production staff, which supports a strategy of producing more to offset increasing costs.


Considerations about staffing are a constant concern for any business; however for the manufacturing and engineering sectors the skill sets required are often very specific. Whilst some respondents are able to recruit without too much difficulty, the skills gap is of real concern for many.


How many apprentices or trainees will you take on in 2014?


Philippa Oldham, of The Institution of Mechanical Engineers, commented: “As companies are expecting to grow over the next year, we would expect them to recruit more staff. Unsurprisingly, the most common skills required are those of an apprentice or skilled engineers. Engineering and manufacturing companies do need to be more proactive in engaging with education providers, demonstrating the profession as an attractive career that offers a wealth of opportunities. Skills will remain high on the agenda as the sector is expected to see 800,000 employees retire over the next decade taking a wealth of knowledge and experience with them.”


www.businessmag.co.uk THE BUSINESS MAGAZINE – THAMES VALLEY – JULY/AUGUST 2014 17%


Will the Patent Box scheme be of benefit to your business?


47% 36%


Yes Not aware No


1% 9% 6% 12% 32% 25% 15% R&D spend as a percentage of turnover


0% 1%-2% 2.1%-4% 4.1%-6%


6.1%-8% 8.1%-10% more than 10%


Over 200 companies took part, comprising a wide range of industries in the Thames Valley, including aerospace, automotive and biotechnology. From niche small businesses right through to multi-nationals with significant industry presence, the report has become established as a barometer of the SME manufacturing and engineering sector.


14%


R&D tax credits


I have applied successfully I have applied unsuccessfully I have applied - unsure of the outcome


86%


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