Half of manufacturing firms expect to invest in their business in the coming months, according to a new report.
A survey of almost 700 companies by the Manufacturing Advisory Service showed a 12% increase on the number planning to spend on new machinery and premises compared to a year ago.
Just over half of the small to medium-sized enterprises polled reported an increase in sales in the first half of the year.
David Caddle of the Manufacturing Advisory Service said: " Manufacturers tend to be very cautious and traditionally would have needed significant confidence in the long-term future to relax the purse strings.
"Encouragingly, our latest barometer provides the clearest indication yet that companies are prepared to invest in new machinery and their premises in a bid to remain competitive and take advantage of significant opportunities both at home and abroad."
Business minister Michael Fallon said: "These findings are the latest indication that the economy is starting to head in the right direction, as we move from rescue to recovery.
"It is particularly encouraging to see that confidence is returning and manufacturers are becoming more optimistic about their future growth."