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Can Asset Finance boost the UK Manufacturing Industry?


By looking at the UK industrial production report, released by the Office for National statistics on March 10 2017, we will discuss how UK production has fluctuated over the last year.

 

UK Manufacturing Industry

 

The Office for National Statistics reported that the UK industrial sector has increased by 1.4% each year since 1946. This may be due to sustained growth of a better quality, more skilled workforce; a shift in production from low to high productivity goods; improvements in automation and technology; increased investment in research and development and a globally integrated economy.

 

Industry Challenges

 

Many British UK Manufacturers are concerned with impact of the rising cost of energy and raw materials, and the potential cost arising from the uncertainty of Brexit.

 

The Impact of Brexit

 

Last June’s referendum signalled the beginning of a sustained period of uncertainty for UK manufacturers. Several issues, from weaker demand prospects to the exchange rate, have left UK firms subdued or unsure in their outlook for the UK economy in the year ahead.

Although the short-term answer is unclear, Brexit has already made an impact on the pound, as it weakened to its lowest to a 31 year low. The weaker pound means that buying British exports is cheaper, which will act as a great incentive for investment from foreign buyers. On the flip side, the weaker pound will make importing materials and components more expensive, which may prove to be a possible challenge for UK manufacturers if they are to remain profitable and competitive.

The Financial Times suggested that car manufacturers may be most at risk after the UK exits the EU. The total committed investment announcements in the automotive sector in 2016 were approximately £1.66 billion, down from £2.5 billion in 2015. SMMT chief executive Mike Hawes commented, “There’s a threat to the industry if we do not reach the rules of origins threshold. The local supply chain could be boosted but you need the manufacturers here in the first place.”

What can be done?

Data from the Asset based finance Association has shown that the UK continues to lead the European market in terms of using asset based finance. Invoice discounting and other types of invoice finance make up around 80% of asset based finance, with the other 20% comprised of asset based lending.

 

With an ever-changing economic environment and increasing pressure of profit margins, invoice finance could free up restricted cash flow. Asset finance could be a cost effective funding solution for manufacturers that rely heavily on the purchase of fixed assets, such as production equipment and tools, that are looking for an option rather than requiring large upfront lump sum payments.

 

Contact Alliance Commercial Finance today where we can help find the perfect invoice finance provider for you.

Added: 24 May 2017 16:27


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