Half of manufacturing firms expect to invest in their business in the coming months, according to the Manufacturing Advisory Service.
A survey of almost 700 companies showed 12% more than a year ago planning to spend on new machinery and premises.
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."
It was also revealed yesterday that manufacturing output growth has accelerated to its fastest pace in two years. A CBI survey found 37% of firms reported volume growth in the three months to August, against 21% saying it had fallen, a balance of 16% – the highest since the same month in 2011, when it was 19%.
The renaissance of Britain's once mighty manufacturing is seen as vital to sustainable recovery, but it has lagged behind other sectors.