The latest Markit/CIPS purchasing managers’ index (PMI) has seen UK manufacturing hit its highest score since February 2011, confirming what many of our specialist manufacturing and engineering clients are already showing us with their operating results: UK manufacturing growth is strengthening quickly. With any score above 50 representing expansion, the August PMI Index hit 57.2, while growth in new order and output accelerated at its fastest rate in 19 years.
Both business owners and acquirers are increasingly confident that this trend is a robust one and we have seen a marked uplift in both internal investment and unsolicited approaches from prospective acquirers. A growing number of business owners can point to two successive years of turnover and profit growth and their order books are giving them much more confidence in the medium-term outlook than has been the case for several years. This is certainly encouraging more private company shareholders to talk to us about a possible exit in 2014.
As pipelines build and the route to return on investment is becoming more certain, several industry and public bodies have reported meaningful increases in their members’ investment in machinery and premises. Most recently, the Manufacturing Advisory Service (MAS) reported a year on year increase in machinery and premises spend amongst UK SMEs of 12%. Furthermore, fully 43% of SME Managing Directors confirmed they are intending to increase employment in the next 7 months, against only 7% expecting a negative movement.
The positive outlook for UK manufacturing is also leading to increasing interest in UK manufacturing and services companies from both domestic and international acquirers, which appear to be embolded to make direct approaches to prospective acquisition targets in sectors where expanding order books and pipelines provide a good degree of medium term earnings visibility.
If you are considering investing in expanding your business, have been approached or are considering selling your business Livingstone’s specialist Industrials sector team is happy to offer clear guidance and insight, whatever the circumstances. We are always happy to speak with complete confidentiality.