Following on from Lee's blog earlier in the week, let's have a look at part of our research in Investment Monitor 2014
, in partnership with Lombard, on manufacturers' investment in intangibles.
Expenditure on physical assets such as machinery, buildings, computers and vehicles clearly forms an integral part of manufacturers’ investment plans, but spending on intangibles such as new software or database technology, marketing, human capital and organisational change have become at least as important as other traditional factors of production in determining companies’ overall business strategies.
UK-based manufacturers know the importance of product quality, strong brand awareness, customer collaboration and employee training as key sources of competitive advantage.
Alongside their investment plans for plant and machinery, a majority of our survey respondents intend to increase spending on a range of intangible areas over the next two years. More than 70% of companies plan to raise investment on staff training and recruitment, with one in six of those companies targeting a significant increase. This latter group saw a clear split in terms of company size, with a bigger share of smaller firms with annual turnover below £10m planning a significant rise in expenditure on staff training and recruitment compared with larger companies.
Marketing and R&D
Three out of five companies in our survey expect to increase their levels of expenditure on marketing and branding activities over the next two years, which is a similar proportion that plan to boost spending on research and development (R&D). Again, in both of these areas, it is mostly the smaller firms that are earmarking a significant rise in investment.
Underlining the important role of intangible investments across the manufacturing sector, our survey shows that companies’ planned spending on intangibles over the next two years is, for the most part, spread across a broad range of areas. Just over 60% of companies expect to increase investment in three or more categories, with just one in six focusing spending on a single area.
Importance of intangibles?
A small positive balance of respondents to our survey stated that expenditure on intangibles was becoming more important for their company than expenditure on plant and machinery, with a slight bias among smaller firms, showing the integral role that intangible investment now plays in many manufacturers’ overall capital expenditure plans.