Growth in borrowing among advanced manufacturers (28.6%) has outstripped more conventional manufacturers (20.1%) over the past five years, driven by an increasingly appetite to grow capacity and bring in new technologies.
The UK’s advanced manufacturers have seen their borrowing jump more than 10% to £65.1bn in the past year, according to research by the Asset Based Finance Association (ABFA).
The growth is more than twice the rate of more conventional manufacturers, which have seen their outstanding borrowings grow by 4.9% to £527.6m over the past 12 months.
Sectors that have seen the rise in borrowing grow quickest include pharmaceuticals (21% growth) and manufacturing controls (123% growth). So-called ‘left-behind’ sectors reportedly include more traditional industries, such as agricultural machinery (down 25%), paper (down 18%) and steel casting (also down 18%) – all of which saw their borrowing fall significantly last year.
The release of the figures reinforce the importance of capital investment (i.e. the latest machinery and technology) in remaining competitive, enabling manufacturers to deliver higher-standard products to customers quicker and at lower cost.
For businesses in longer-established sectors that no longer see double-digit growth rates, a lack of funding to invest in new equipment could hit productivity, warned ABFA.
Its CEO, Jeff Longhurst explained: “Advanced pharmaceuticals and aerospace technology are enormously exciting areas in which the UK is a world leader. However, in terms of securing jobs as the country goes through the uncertainty of Brexit, some of the more traditional manufacturing sectors have a critical role to play as large employers.
“Manufacturing is very reliant on finance to make sure plant and machinery is up to date. Without that crucial funding, it’s difficult for manufacturers to remain competitive.
“That’s why asset based lending is a vital route to funding for manufacturers – it unlocks the value of assets that are traditionally seen as a drag on profitability, like unsold stock, and releases finance that can drive growth and keep UK manufacturing competitive.”
The value of asset based lending in use by UK businesses at the end of 2016 reportedly stood at £4.25bn, up 73% on £2.45bn five years earlier.