Frozen capital is keeping manufacturing in a cold climate

Posted on 19 Jul 2012 by Hazel Jeffs

A new report from Siemens Financial Services claims that UK manufacturers have trapped £2.17bn worth of capital thanks to inefficient equipment purchasing strategies.

The report suggests that better use of asset finance models in the UK could release these funds, allowing businesses to be more flexible in attending to investment priorities.

Siemens Financial Services (SFS) says that £2.17 billion was ‘frozen’ in manufacturing industry across Britain in 2011 in outright equipment purchases.

The figure of £2.17bn does represent a reduction in what SFS claim is inefficiently deployed capital. In 2009 the sum was £2.4bn.

SFS says this shows British manufacturing is making some progress towards better use of its available capital, but is still not yet making widespread use of available financing tools.

The report highlights the limitations which current approaches to capital deployment may be having on the UK’s international competitiveness and its ability to remain at the technological forefront of manufacturing.

David Martin, general manager for SFS in the UK, said that it is simply not an option for organisations to have a significant proportion of their budgets tied up in this way “Given the slow economic recovery in Europe and persistent tight credit conditions, it is all the more important that manufacturers release much needed liquidity to implement operational efficiencies or fund new product development in order to maintain their competitiveness.”

Mr Martin recommended that the organisations made a greater use of asset financing techniques to acquire the most up-to-date technology and equipment, asserting that it was “critical to making technological and process developments affordable, and economically sustainable.”