Manufacturing industry ‘struggling’ to replace vital equipment

THE manufacturing industry is struggling to replace old equipment, research from the Open University Business School suggests.

The report reveals that a quarter of small manufacturers have been unable to replace vital equipment because of cash-flow problems in the recession.

Sixteen per cent of SMEs have not been able to replace operating equipment during the downturn, with 6% reporting that it posed a risk to their business.

Other research by Oxford Economics showed that investment in equipment has fallen by more than in either of the two previous recessions.

Jason Lincoln, director of Barnsley-based asset finance broker Lincoln Finance, said: “Manufacturing has been particularly badly hit but the problem doesn’t end there. Nearly a quarter of the hospitality industry said they were also struggling to find the money to buy new equipment and the negative effects have also spread to transport and agriculture.

“It’s vital that as we come out of a recession businesses have the equipment they need for when demand picks up, but problems with falling profits and difficulty getting loans or overdrafts mean many have just made do with what they have.”

But Mr Lincoln reports signs of an upturn in investment by businesses using asset finance, where manufacturing plant, cars, vans and other equipment are procured by leasing or hire purchase, allowing businesses to avoid paying for equipment upfront.