Is finance the only obstacle to investing in growth?

Posted on 20 Nov 2018 by The Manufacturer

Manufacturers understand where to look for money. So, what is holding them back from investing in growth-enabling digital technologies?

Coins Money Finance Investing in Growth Investment - image courtesy of Depositphotos.
For manufacturers, what often stands in the way of investment is not finance or lack of it, but uncertainty – image courtesy of Depositphotos.

Access to finance can make the difference between a company achieving its growth goals and standing still.

That at least is the conventional wisdom, but as any MD or FD will attest, the picture is often a great deal more complicated than that.

What The Manufacturer has discovered through our formal research and informal conversations with manufacturers is that what often stands in the way of investing in growth is not finance nor lack of it, but uncertainty.

This uncertainty falls broadly into two categories:

  • Political – no prizes for guessing that Brexit is casting a pall of uncertainty over all UK business, but the government is getting credit for putting cash behind its campaign to persuade manufacturers to invest in digital technologies.
  • Information – at one high-level gathering to discuss digital adoption, the operations director of a very well-funded company was heard to say: “There’s so much information and jargon about these new technologies coming at me, it’s like sticking my mouth over a firehose and turning it on. And then I worry whether I have chosen the wrong firehose!”

The combination of these two factors can be enough to persuade business leaders it is better to hold fire rather than invest.

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Guidance – like finance – is out there

UK banks have taken some flak since 2008, but there is no doubt they are keen to get behind UK manufacturing. There are other financial services players out there too, ready to support manufacturing investment.

Intriguingly, a lot of companies The Manufacturer speaks so say they do have finance available, often sitting on their own balance sheet. So, overall, investment decisions stand a great chance of being funded.

It is guidance that companies appear to need most. It is available from government-funded bodies like the High Value Manufacturing Catapult and, for exporters, from UK Export Finance. Equally, technology partners have years of experience to draw on to offer advice as well.

Business leader should also not be shy of asking vendors frank questions about their proposition and how to fund it – they are likely to be pleasantly surprised at what they discover, particularly when it comes to financial models such as SaaS (Software-as-a-Service) which radically reduces the investment burden.

They will also discover that investment can be approached gradually which relieves financial pressure while causing minimal disruption to operations.

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