By Daniel Hunter
Britain’s manufacturers are maintaining their plans to invest in assets to increase productivity and reduce energy use, amidst a significant shift in the finance and lending landscape according to a survey released by EEF, the manufacturers’ organisation, and Lombard.
According to the survey, almost 60% of companies have bought assets in the last three years to boost growth, whilst even more (67%) plan to invest in capacity over the next three.
These plans were overwhelmingly driven by a desire of companies of all sizes to increase productivity (80%). In addition, the increasing impact of higher energy prices, especially on larger companies has driven 57% to invest in assets to reduce energy consumption, with slightly more intending to do this in the next three years.
“This data shows that despite difficult times companies are getting on with investing to improve their productivity and energy efficiency," Commenting, EEF Director of Policy, Steve Radley, said.
"When companies are looking to access finance to invest in new assets, the survey also shows that asset finance can be an important part of the mix.”
Ian Isaac, Managing Director, Business & Commercial, Lombard said:
“It is widely accepted that manufacturing will play a vital role in the UK's recovery. However, in order for the UK’s manufacturing businesses to succeed, further investment is critically needed in the sector’s asset base.
“It is welcome that so many companies intend to invest in plant and machinery over the next three years to boost growth, especially using asset finance, with its flexibility, when accessing external funding. It is clear that asset finance providers have a huge part to play in supporting the sector as it continues to be the backbone of the UK's recovery.”
The survey also highlights the response of manufacturers to the changing lending landscape in recent years and, the specific types of finance they are using to purchase assets.
Almost 70% of companies used internal funds as one of the ways to finance asset purchase whilst, a third used this method solely over the last three years, a trend predicted to continue for the next three. Fear of taking on debt and certainty over the cost of finance were the main reasons cited for using internal funds.
However, the survey shows companies are looking to other types of finance. Where external finance was used to acquire assets, the vast majority (86%) chose asset finance, significantly outstripping traditional loans at 34%. When deciding to use external finance 44% of companies said a key reason was knowledge of the long term or full cost of the finance. This is expected to continue over the next three.
The survey also shows different attitudes towards the types of assets for which asset finance is appropriate. The major factor was plant and machinery (67%), followed by vehicles (50%), building and property (23%) and hardware and software (20%).
Preferable interest rates appear to have been greater concern in the past. 40% said this was an influencing factor in the previous three years, whereas only 34% would consider them so in the future.
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