Is capital expenditure spending proof business confidence has been restored?

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This could indicate that UK corporates have started to loosen the purse strings, a sign that business confidence has been restored post-recession

Nationally, 62 per cent of procurement professionals say that company spending on capital expenditure, which typically includes investment in plant, machinery or technology, has increased in the past year. Of these, one in ten said they had spent between 50 per cent and 100 per cent more than in the previous year. Even more optimistically, 73 per cent of respondents said they are expecting capital expenditure to increase in the year ahead – a sign that businesses are at last becoming more willing to invest in growth.

Nigel Crunden, marketing manager at Office Depot, said: “It is a really interesting time to take a snapshot of procurement dynamics across a range of sectors. Although the economic downturn has impacted on business confidence, spending on purchases that can deliver improved operational results or increase production capacity seems to be rising, suggesting increased business security and optimism

“However, there is some evidence of caution when making purchasing decisions and the majority of procurement managers tell us they are more influenced by price than quality, although one in three consider both to be equally important.”

Other considerations are playing more of a role in the decision-making process, as cost pressures force buyers to further qualify that a supplier will deliver on its promise. 84 per cent of respondents stated that they conduct in-depth online research into the quality and reputation of a supplier before placing an order.

Nigel Crunden continued: “Fact finding and desk research as to the competencies of a supplier have become firmly embedded in the culture of procurement processes across industry sectors. This was most evident in the construction sector, where nearly all of the respondents said this was an integral part of supplier selection, compared to 83 per cent of manufacturing firms, and 56 per cent of public sector departments.”

According to Office Depot, given that the bar has now been raised, in terms of the expectations placed on suppliers, the supply chain must now work even more closely together to support UK businesses as they grow.

Nigel Crunden concluded: “While an increase in business investment across industry sectors is clearly apparent from this study, there is still a firm focus on getting as much return on investment as possible.

“Suppliers can help to meet this challenge by fully engraining themselves in their customers’ business culture and designing product and service offerings that meet their needs. Customers can do their bit too by streamlining ordering and billing processes.”

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