The level of investment by manufacturing firms could be boosted by up to £10 billion if they take advantage of the range of finance options available.
Significant investment is lying untapped due to a lack of awareness among companies of the private and public options available to them, according to a major report published by Make UK, NatWest and Lombard.
It says that such a boost would raise the investment potential of the sector overall by up to a fifth and help address the UK’s long-term productivity weakness.
In particular, the report shows access to finance will be critical for companies’ investment plans in the next two years in categories such as capital equipment, automation, energy efficiency and cyber security. These investments are essential, it says, if the UK is not to fall behind in the race to net zero and in areas such as innovation and robotics.
Ian Price, Director of CBI Wales, said:
“Low levels of business investment have been a persistent challenge for the UK economy and addressing this is critical to improving the country’s economic trajectory. That’s why the Chancellor’s decision to make full expensing a permanent feature of the tax landscape in last year’s Autumn Statement was so welcome.
“That move allowed the UK to remain competitive with international rivals on investment incentives, while giving firms the confidence and certainty they need to press ahead with proposed investments. The recent announcement that the Government plans to extend full capital expensing to leased and rented assets means that even more companies – particularly small and medium sized manufacturers – can potentially benefit and invest with confidence in their UK operations.”
The report also suggests that barriers to finance remain, with more than half of companies unaware of the range of public sources of finance and government schemes tailored towards manufacturers. Domestic economic and political uncertainty, together with the threat of increased costs, is also deterring manufacturers from accessing finance in the next two years.
Fhaheen Khan, Senior Economist at Make UK, said:
“Access to finance is like fuel for manufacturers. Without it many manufacturers would be unable to make the continuous investments in capacity and innovation which are so essential in such a dynamic sector with an ever-changing external environment.
“However, there is currently significant investment which is lying untapped due to a lack of awareness among companies of the private and public options available to them. If we can unlock the options that finance provides then it will produce significant potential for manufacturers.”
Dr Jenifer Baxter, CEO of Industry Wales, said:
“Manufacturing provides highly skilled jobs that drive businesses and industry in Wales and ensuring these companies have easy access to funding is vital to growing the sector. Managing a business day to day can be tricky enough without the added challenge navigating complex routes to finance.
“Creating a simple approach to financing manufacturing alongside support in access and other solutions that reduce costs and improve efficiency and decarbonisation would be welcomed by Industry Wales.”
Laura Capper, Head of Manufacturing and Construction at NatWest, added:
“Finance is fundamental to helping UK manufacturers unlock investment to grow, innovate or become more sustainable. In the face of constant significant challenge, the manufacturing sector has remained resilient, and businesses have continued to invest to ensure they remain future fit.
“Access to external finance is a key enabler to support these ambitions. That said, with such a broad range of options and providers available, choice can seem overwhelming.
“There is a real opportunity for greater engagement between manufacturers, lenders and other key supporters across the eco-system to collaborate to provide flexible funding and solutions to ensure future financial stability.”
According to the report, unlocking manufacturers’ investment potential through access to private and public sources of finance could be worth £9.2bn in the next twelve months alone. This would be additional to the annual investment in capital equipment (£33bn) and R&D (£19bn).
Almost three quarters of companies said that investment would not take place without access to finance, while just under a third said their investment would have taken place without any access to finance.
The report says that, as well as improved awareness of private financial options available to manufacturers, there needs to be far greater awareness of the public sources of finance and Government schemes such as the Horizon Europe programme, the Government’s flagship management Help to Grow scheme and British Business Bank.
Make UK is calling for a centralised database supported by AI which would signpost both public and private provision.
Paul Butterworth, CEO of Chambers Wales, said:
“Access to finance essential for any business to grow. A sound financial plan provides continuous development and innovation underpinned by investment into equipment and skills development. The Chamber supports and advocates the Help to Grow programme through Cardiff University Business School and highly recommends it to SMEs as an essential business tool.
“Businesses do tell us through our Quarterly Economic Survey it’s not always clear where the right funding and support can be found here in Wales. British Business Bank and Development Bank of Wales do provide good access to finance as well as more traditional high street offerings, but finance sources through Government-backed schemes can be difficult to navigate where access can be provided.
“Manufacturers who export could benefit and gain support through UK Export Finance's offering and other providers for working capital. There are options for manufacturers, but as this report shows there is still a need for the advice to be simpler to access.”
