Manufacturing Growth: Access to finance remains the key

THE manufacturing industry faces specific challenges when it comes to utilising and accessing finance, sector experts have said.

All this week, TheBusinessDesk.com, in association with DLA Piper and Deloitte is taking an in-depth look at the region’s manufacturing sector and identifying areas of potential growth.

One of the main inhibitors to growth is seen as an inability by SMEs to access the finance they need in order to develop.

Many have blamed the banks for not lending in the same volumes as they did; the banks say the money is there, it is just that a lot of firms are too scared to ask for it either because they are unwilling to take on more debt or think they will be turned down anyway.

The climate of fear which now envelops the sector means growth is stagnating and firms are struggling to sustain their business.

To read more about how to secure growth in the Midlands manufacturing sector download the free DLA Piper/Deloitte supplement by clicking here

Noel Haywood, corporate partner at law firm DLA Piper, said the innovative nature of the sector meant that in order to remain competitive, manufacturing companies are in a continuous investment cycle, often needing funds to secure strong levels of skilled workers.

However, he said with fears over a stalling economy in the UK, rising inflation and the international crises in the Eurozone and the United States, many firms were wary of taking on additional risk.

He said even where companies have robust business models, financing was sometimes proving difficult.

“Debt pricing is facing upwards pressure though we suspect that in terms of corporate facilities and refinancing, flagship clients and companies with strong credit histories will access credit quite comfortably,” he said.

“Smaller and younger companies with weaker or less complete credit stories will find access to finance considerably more difficult.”

However, he said there was hope for firms in the Midlands, with the region very much at the centre of new funding initiatives such as the new £140m high value manufacturing Technology and Innovation Centre and the launch of the Birmingham-based Business Growth Fund, while LDC’s recently announced £200m investment in the sector would be a potential “lifeline” for mid-market businesses.

Alistair Davies, director, regional development services division, Deloitte, said the Government’s £1.4bn Regional Growth Fund was also a significant programme.

“Assistance has been targeted towards projects which involve plans to create net new jobs whilst projects located in areas of above average public sector employment have had priority,” he said.

One of the first grants awarded was to Jaguar Land Rover for its engine development programme and is thought to have been a major factor in the company agreeing to build its new engine plant in South Staffordshire.