14
MARKET UPDATE
In 2015, the size of the UK Precision
Engineering market rose by 1.1%
year on year to £5.83 billion, with
the majority of the 1500
1
Precision
Engineering companies in the UK being
small to medium sized companies
with a turnover of £2 to £5 million,
a large portion of which service a
single client or sector such as the
automotive industry or the aerospace
industry. This is in keeping with the
wider engineering sector in which
most engineering enterprises (97.1%)
are either small or micro and, overall,
86.9% of engineering enterprises
have fewer than 10 employees.
2
Plimsoll’s Precision Engineers Market
Report 2015, shows that 400 companies
are making a loss (over a quarter of the
companies in the marketplace) and 161
companies have lost over a quarter of
their value in the last year. This reflects
the difficulties which can occur with
over reliance on one customer and
lack of diversification across sectors.
Market commentators also point
out that long established companies
can become institutionalised, lose
innovation and lack the cash flow
to renew machinery, particularly in
times of cutbacks in manufacturing.
Having said that, Plimsoll reports
examples of excellent profitability in the
industry and shows average company
sales growth at 4.4%, up 2% year on
year. It also finds that 40% of companies
achieved the 10% return on investment
that an investor would typically be
looking for, whilst the average is around
7.9% return on investment, with larger
companies generally outperforming
their smaller counterparts: The pre-
tax profit return on total assets of a
larger company is 9.2%, outperforming
their smaller counterparts who
manage 6.0%
1
. This suggests that
economies of scale can have an
important impact. For the most part,
the averages in this industry compare
favourably with the UK averages:
The Precision Engineering market did, however, follow the trend of the recent economic downturn, although it was, to some
extent, supported by smaller scale manufacturing output, the need for cost saving innovation and by maintenance and repair
work which is an on-going source of business. As a result, unsurprisingly, the figures show negative sales growth in 2009/2010.
GROSS MARGIN (%)
TRADING PROFIT MARGIN (%)
PRETAX PROFIT MARGIN (%)
PRETAX PROFIT +
DIRECTORS FEES MARGIN (%)
PRETAX PROFIT RETURN ON
SHAREHOLDERS FUNDS (%)
PRETAX PROFIT RETURN ON
TOTAL ASSETS (%)
UK PRECISION ENGINEERING COMPANIES PERFOMANCE DATA
1
(2015)
30.4
35.5
28.6
20.8
5.9
15.2
10.8
5.6
3.6
11.8
5.7
1.9
5.6
14.3
8.7
3.4
12.8
28.5
15.7
4.5
5.4
13.9
7.9
2.2
UK
AVERAGE
UPPER
AVERAGE AVERAGE LOWER
AVERAGE
