Too many mid-sized UK manufacturers are held back by difficulties raising finance. But with a little more understanding, by looking at how to make the most of their fixed and working capital assets, that need not be the case. Ian Flaxman of Wyelands Bank explores the issue.
The UK manufacturing sector employs 2.6 million people, or one in 12 jobs, and is responsible for nearly half of the country’s exports. Yet it is one of the under-served parts of the economy.
These firms can be too big to benefit from the off-the-shelf services available through the fintech revolution. Yet too small to warrant personal attention from the larger banks.
Despite the importance of the sector, many mid-sized manufacturing firms are struggling to get the funding they need. Insufficient access to capital is a real problem for them.
Unlike the largest PLCs, the mid-sized, high growth and entrepreneurial businesses do not have the scale to grab attention and demand investment.
What’s the issue?
Wyelands Bank research of UK mid-sized manufacturers turning over £10m to £300m shows that too many UK mid-sized manufacturers are not able to get the right finance they need to unlock growth. One in three say the problem is worse now than it was five years ago.
Addressing the issues behind this is critical to help the UK’s manufacturers to trade, grow and create jobs.
What’s the impact?
Our research shows that nine out of ten (89%) UK manufacturers are being held back by lack of finance. Overall, the research shows they are missing out on up to £183bn between them.
The difficulties in raising finance have stopped these firms from winning new contracts and the knock-on effect of that has been to stifle new job creation.
Firms said that on average the difficulties accessing finance meant they had missed out on 11 new contracts which would have delivered £20 million in revenues. These would have enabled each firm to create 10 new jobs on average.
These figures suggest that the 23,000 mid-sized manufacturing businesses in the UK have collectively missed out on 163 thousand contracts. These would have created 175 thousand jobs and delivered some £183 billion in revenues.
Mid-sized businesses are responsible for so many jobs (534,900 new jobs created in the last year alone), as identified in BDO’s New Economy report. So this lack of finance is not good enough to help secure a strong post-Brexit economy.
What’s the solution?
UK mid-sized manufacturers are not able to grow to their full potential without greater access to finance. But that finance has not necessarily been available.
It is clear that the mid-sized manufacturers (what BDO calls the “UK Economic Engine”) is a driving force behind the UK economy. We would like to see the issue of financing tackled more systemically.
To unlock growth, mid-sized manufacturers need financial support which is tailored to their specific business needs. That means banks need to take the time to understand what the business does, so it can provide finance that is in line with those growth plans and to help the UK’s mid-sized manufacturers to trade, grow and create jobs.
Download BDO’s New Economy report and our research to find out further information.
By Ian Flaxman, Managing Director, working capital solutions, at Wyelands Bank.