UK manufacturers favour asset finance

Asset finance is the main source of funding for UK manufacturers, second only to cash reserves, according to the Annual Manufacturing Report 2011 (AMR).

Asked to select which methods they had used to raise capital over the last two years and which they expect to use over the next two, 37% of UK manufacturers identified asset finance.

The funding model outstripped overdrafts, bank loans and venture capital investment but was surpassed by the option to use company reserves which 80% of manufacturing companies selected.

Mark Lee, head of Manufacturing, Transport and Logistics at Barclays Corporate, said of the findings: “With close to 40% of companies utilising asset finance as an option, it is clearly a very popular instrument for raising capital and suits the sector well.

“The logistics and cap-ex spend which takes place in manufacturing is appropriate for asset finance.”

The AMR is compiled by trade magazine The Manufacturer in conjunction with Barclays Corporate using data from an online survey of UK manufacturers conducted over August, September and October.

This year’s report is the first AMR to include asset finance as a funding option.

The 11^th annual report also found most manufacturers expect a reduction in investment levels compared to the findings of the previous year’s survey.

Half of those surveyed will invest or have invested in machine tools this year, down from 60% for 2010, while investment in communications infrastructure was the only area which saw a marginal increase in investment.

The majority of respondents expected investment in machinery to increase next year and major investment in machinery over the next five years.

The survey also identified cost reduction and cash-flow increase as the most important focal points of financial management in the companies surveyed