Heather Griffin, Director Automotive at Clydesdale and Yorkshire Banks, discusses the positive impact of Britain’s thriving motor industry and how the automotive supply chain can benefit.
The UK reported its highest car sales of the 21st century in March 2015, supported by 492,774 new registrations, the largest figure since 1991. In less than a week, Britain’s booming automotive industry received investment of more than £1bn, through separate funding for Jaguar Land Rover (£600m), Honda (£200m) and the London Taxi Company (£250m).
The Society of Motor Manufacturers and Traders (SMMT), has predicted that by 2017 car manufacturers will surpass the record production levels reached in 1970, with Britain making more cars than ever before.
But it is not just car manufacturers that are experiencing the benefits of this production boost. The supply chain plays a crucial role in the automotive industry’s economic success and is growing to keep up with an ever-increasing demand.
According to the Automotive Council UK, in 2014 sales from UK suppliers to vehicle manufacturers rose by nearly a fifth. This increase shows there is an undeniable opportunity for suppliers to capitalise on the industry’s growth.
There is, however, still a level of uncertainty among SMEs in sourcing financial support. Improvements have been made in this area such as the creation of the British Business Bank (BBB), which aims to enhance access to finance while making the banking industry more competitive.
The BBB’s Enable Guarantee scheme, which Clydesdale and Yorkshire Banks were the first to join, is aimed specifically at helping challenger banks support more SMEs. Ease of access to finance for smaller businesses remains a priority for the government, with most parties highlighting this area in their manifestos for the General Election ahead of May.
Supporting the SME market is and always has been a core focus for us. We fill a particular gap in the market, providing the full product offering of a bigger bank, but also the personal service, speed and agility only a smaller bank can provide. In some ways, we’ve always provided that challenger bank presence, arguably well before the term was coined.
Developing long term relationships with our customers is what we do – it’s not just important for us, it’s critical. For example, we understand there can be a gap between tooling investment and returns – only by working closely with management can we ensure we can match funding and investment to future cash flow which can be two years down the line.
While providing access to finance remains core to supporting the prosperity of a business, our experience highlights that many businesses are also looking for support beyond just funding. This is where we believe we can provide genuine added value through our sector approach.
By embedding ourselves in the automotive sector, and working with key industry members we have a strong understanding of industry dynamics and how they impact the financing requirements of the supply chain. Whether a business is looking to extend or move premises, increase working capital to support growing sales or fund specific assets, such as machinery or tooling we are keen to talk.
Early collaboration between businesses and banks is key to unlocking this growth potential.
When approaching a bank, a business should be willing to share a meaningful business plan including forecasts which are important when looking at future repayment against cash flow which is a feature of tooling finance. A business should also be established, willing to talk about its key partners and ideally demonstrating a successful trading history built up with a number of OEM’s and/or Tier 1 suppliers across a wide range of products.
Our partnership with the BBB has enabled us to invest more heavily in the automotive industry. We have set up a dedicated support team headed by myself and Kevin Rimmer (Head of Manufacturing) at Clydesdale and Yorkshire Banks. We’ve also had the opportunity to launch the Automotive Tooling Finance product, which provides up to £1m per tool to support development and build.
This product is designed to help SMEs bridge the gap between the initial investment in a new product and the returns they will make from it. We can provide as much as 100% of the tooling finance and match repayments to cash flow receipts, giving business owners peace of mind that they have the funds to support new business wins.
We are keen to speak to ambitious business owners who are enthusiastic about experiencing the current thriving growth of the automotive sector. It is an exciting time for the industry and we are glad to be able to invest in the SMEs contributing to its success. We would encourage businesses to get in touch to find out more about how we can specifically support them.
For more information please visit our website or call me direct on 07802 919644.
