Executive Summary

The apparent UK market for machine tools was estimated to be worth £967m in 1996, although this figure excludes parts and accessories, and the closely linked cutting tools market value. The machine tools market has always been highly cyclic, driven as it is by other capital goods demand cycles. Market growth for 1996 was 25.9%, although it is expected to fall to 3% in 1997.

The market consists of three main sections. These are classified as: conventional metal cutting machine tools (such as machining centres, lathes, milling machines and grinders); unconventional metal cutting machine tools (such as laser, physico-chemical and water jet machines); and metal forming machine tools. The large parts and accessories market is considered as a separate sector to these three main markets. Ancillary to these sectors is the cutting tools market, which supplies changeable cutting tools to the production users of machine tools.

The machine tools industry supplies all manufacturing sectors with the tools that enable them to manufacture industrial and consumer goods. Thus, the machine tools industry is severely affected by changes in demand for all manufactured goods and is thus highly cyclic. The industry cannot react to high swings in demand sufficiently quickly, therefore, imports make up the shortfall.

The major users of machine tools are vehicle manufacturers and the aerospace industry. A new automotive plant will create a sudden demand for machine tools, both from the plant and from their subcontractors, as has been seen with recent export orders from Spain and China. In 1996, the semiconductor sector in the UK required physico-chemical machinery which caused a sharp rise in imports from the US. Strong sterling has improved the purchasing value of the pound and has contributed to the rise in imports.

The market for machine tools is predicted to grow to £1.26bn by the year 2001, although it is subsequently expected to fall again as it passes the peak of the next cycle. This figure will be affected by various uncertain factors, such as whether new car plants are created in the UK, the progress on the Airbus 3XX 850 seater aircraft, the consequences of a single European currency, changes in the base interest rate, and tax incentives on capital investment in plant and equipment by the new Labour Government.

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