LONDON (Reuters) - British manufacturers are cautious about increasing levels of capital spending, a trade group said on Monday, raising questions as to whether a recent pick-up in business investment is sustainable in the long term.
A new survey by the EEF manufacturers' group and Lombard Asset Finance found that most firms had only moderate investment plans which focused largely on replacing outdated technology.
Business investment, key to boosting productivity, has grown for five quarters in a row but still lags well behind pre-recession levels and is below spending in other countries.
The Bank of England is looking for signs that business spending will continue to rise as it assesses whether Britain's economy is on the right track for the long term.
"We're not yet seeing the step change in investment plans we need," said EEF chief economist Lee Hopley, citing uncertainty over demand and a shortfall in financing.
Only one in three manufacturing firms taking part in the survey said they will invest the same on plant and machinery in the next two years as they did in the previous two.
The survey showed a more positive outlook for expenditure on training, marketing and research and development.
To boost business investment further, the EEF called on the government to improve access to finance for small and medium-sized companies and establish long-term rules for tax breaks that support capital expenditure.
The survey was conducted between April 30 and May 14 with 173 companies responding.
(Writing by Hannah Murphy; editing by William Schomberg)