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Manufacturers ‘Thriving’ Despite Uncertainty about Economy

Posted on August 4, 2014

Almost a third of manufacturers and distributors in New England describe themselves as “thriving” in 2014 despite a less positive view of their state and local economies than counterparts around the country, according to a new study.

McGaldreyMonitor2014The 2014 Regional Manufacturing and Distribution Monitor published by McGladrey finds that 62 percent of the 77 regional companies surveyed reported their status as “holding steady,” while 9 percent said they were declining. Those numbers were slightly weaker than those for the nation as a whole, a difference McGladrey attributes in part to the high concentration of biotech, life sciences and medical device companies here that face regulatory challenges and intense competition.

The survey found that only 18 percent of manufacturing and distribution companies believe the local and regional economies have a positive impact on their businesses. And in the battle among states to lure businesses and jobs, 13 percent of New England companies feel that their state’s business-development incentives effect growth, compared to 22 percent nationwide.

States with the highest grade for business incentives are North Carolina, Ohio, Wisconsin, Texas, Indiana and New York.

“Like their national counterparts, New England companies have seen improvements, or significant improvements, in company performance due to their investments in operations practices and capability. Similarly, investments in product/material acquisition and product/process innovation have led to improvements for a great percentage of New England companies than those nationwide,” the report says.

The report finds that thriving companies share several key strategies for growth.  Forty-seven percent work to lower costs through operational efficiencies, 39 percent focus on profitable customers, 36 percent invest in equipment, 26 percent increase prices to a majority of customers and 23 percent upgrade technology.

Manufacturing companies nationally are also looking at mergers and acquisitions to grow, according to McGladrey. The value of US industrial and chemical merger and acquisitions deals doubled to $28.6 billion dollars in the first quarter compared to the first quarter of 2013, while the technology sector saw deal values rise to $38.1 billion during the first three months of the year.

Other report highlights include:

  • 57 percent of New England manufacturers and distributors are planning to increase their work forces;
  • 64 percent report that productivity has increased;
  • 63 percent plan to increase investment in information technology;
  • 65 percent cite material and components pricing as the greatest impediment to growth;
  • 87 percent expect health insurance costs to increase; and
  • 62 percent believe their data is at little to no risk.
  • 95 percent expect employee costs to rise.

New England companies also differed from their national counterparts in their views of federal health care reform ” 55 percent of regional manufacturers consider the Affordable Care Act to be an impediment to growth, while 69 percent of companies nationwide regard ACA as a problem. The difference likely reflects the fact that Massachusetts employers have been dealing with health-care reform since the commonwealth launched its first-in-the-nation overhaul in 2006.

A number of AIM member companies participated in the McGladrey survey. McGladrey is a global provider of tax, consulting and assurance services to middle-market companies.