The Finance & Leasing Association (FLA) and the Manufacturing Technologies Association (MTA) have released a joint report calling on the government to help improve the future financing of high-value manufacturing by increasing the use of asset finance (leasing and hire purchase) through the Regional Growth Fund (RGF).
Published ahead of the Spending Review later this month, the report, Investing for growth – boosting the real economy, urges the Chancellor to retain the RGF and extend the eligibility criteria to include those SMEs who can obtain funding from other sources, as this would help to channel much needed finance to those firms with real growth potential.
If the UK wants to increase its productivity and remain competitive in the international market place, businesses must be able to utilise the latest technology, which will often include software, the organisations say.
Increasing the awareness and use of leasing and hire purchase would help to achieve this goal, they say. Productivity among lenders in the asset finance sector was found to be seven times the national average by Oxford Economics, and both the FLA and MTA want to see these efficiency gains spread throughout the economy.
Simon Goldie, head of asset finance at the Finance & Leasing Association, said: “The UK’s productivity gap will persist unless firms have access to the widest possible range of investment options. The British Business Bank has already described asset finance as a ‘market solution to a market failure’, and the Regional Growth Fund is a vitally important gateway to get this type of finance to smaller businesses.
“The recommendations published today reflect discussions we held with funders and manufacturers at the recent party conferences. Raising awareness of leasing and hire purchase, and ensuring that the regulatory environment supports its use, will help smaller businesses tap the productivity gains that technology brings.”
James Selka, chief executive of the Manufacturing Technologies Association, said: “UK manufacturing has a huge opportunity to take advantage of the revolution that is happening in technology across the world. Automation is changing the nature of the manufacturing cost base, while smart technologies and the application of big data to manufacturing processes – sometimes called Industry 4.0 – are transforming how we create the world around us.
“That technological innovation has to drive innovation in how finance interacts with manufacturing. Support from government to make that happen – to enable SMEs to access the asset finance they need – would be a real contribution to resolving the productivity challenge.”
The four recommendations set out in the joint report from the FLA and MTA urge the government to:
- Create an on-line directory of all UK business finance providers and publicise it widely to UK SMEs;
- Build on its recent commitment to apprenticeships by introducing a national secondary school curriculum, which would focus on design and technology;
- Establish a new finance support scheme to facilitate the funding of intangible assets, and target the Regional Growth Fund at businesses with the most potential for growth, particularly those in the high-value manufacturing sector, and;
- Accelerate its review of the Consumer Credit Act, including the application of the consumer credit regime to business lending.