The Midland manufacturing sector is set for a giant investment drive this year according to new research.

Nearly 90 per cent of respondents to the Manufacturing Advisory Service (MAS) Barometer were planning to spend on capital equipment.

Small to medium-sized manufacturers in the West Midlands plan to spend an average of £165,000 this year on machinery and infrastructure to cope with surging demand, new research shows.

The latest MAS Barometer revealed that 73 per cent of firms surveyed were looking to purchase new plant and machinery, half were investing in communications infrastructure and more than a third on improving premises.

With almost 10,000 firms making up the West Midlands SME manufacturing community, this could equate to as much as £1.6 billion worth of investment in a year.

A record 115 West Midlands SME manufacturers responded to the latest MAS Barometer, which provides an overview of economic conditions and issues faced by the sector during October to December 2013.

Six out of 10 of companies reported an increase in sales over the last six months, while 79 per cent expect to boost sales between now and June 2014.

Lorraine Holmes, area director for MAS, said: “There is a definite feel good factor around West Midlands manufacturing at the moment and these latest figures reinforce positive reports from the Society of Motor Manufacturers and Traders together with encouraging Purchasing Managers’ Index data.

“Investment is crucial if we are going to take advantage of reshoring and predicted growth in markets such as offshore wind, renewables and low carbon vehicles.”

She added: “Importantly, 10 per cent of smaller businesses are looking to spend more than £500,000. This is a significant figure and proves that SMEs are prepared to invest ‘big’ in order to take advantage of opportunities presented by the upturn.

“The fact that more companies are applying for grants and the Regional Growth Fund means awareness of available support is rising and I’m encouraged that some firms are also using their own in-house funds. This suggests manufacturers have been prudent through the recession and are trying to be more self-reliant when it comes to financing expansion.”

Respondents to the survey said the main reasons driving these investment plans were developing new products, at 35 per cent, and boosting efficiency or quality, at 33 per cent, while more than one in five said they were expanding capacity.

In terms of how the expansion would be funded, only a quarter said they planned to approach banks to fund capital equipment purchases, with 31 per cent planning grant-funding and 27 per cent applying to the Regional Growth Fund.

Meanwhile, for the first time since the Barometer launched in 2012, more than half West Midlands manufacturers are expecting to take staff on over the next six months. A total of 52 per cent signalled an intention to recruit, marking a 22 per cent rise on the previous report.

Ms Holmes added: “The employment data makes for very interesting reading. Despite previous Barometers showing optimism in sales, investment and new technology, the number of firms planning to recruit has remained fairly flat over the past year.

“This was understood to be because companies were retaining staff during the slowdown in the hope that volumes would return. With so many firms confident of growth it could be that manufacturers are now looking to increase capability and capacity, or perhaps are looking to attract employees with different skills.

“The significant question now is do we have enough people to fill these positions or will it be a case of growing capability through apprenticeships and graduate recruitment?”

Business and Energy Minister, Michael Fallon, said: “These figures point towards signs of a renaissance in manufacturing. SMEs are increasing in confidence, and looking to both recruit and invest.

“We’re committed to working closely with the manufacturing sector to provide a strong base for the recovery, and create growth for the future.”