Mid-sized UK manufacturers are held back due to insufficient access to finance.

By taking the time to understand these businesses and making the most of their fixed and working capital assets, we can help them to trade and grow. By Ian Flaxman

The UK manufacturing sector employs 2.6 million people, or one in 12 jobs, and is responsible for nearly half of the country’s exports. Yet despite the importance of the sector, many medium-sized manufacturing firms are struggling to get the funding they need to grow.

New Wyelands Bank research reveals just how these firms are held back due to a lack of finance. By addressing this issue, we could help the UK’s manufacturers to trade, grow and create jobs.

What’s the issue?
Our research of UK mid-sized manufacturers, turning over £10m to £300m, shows that nine out of ten firms (89 per cent) are held back because of a lack of finance. These difficulties in raising finance have stopped UK mid-sized manufacturers from winning new contracts and that has stifled new job creation. Each firm said that the difficulties raising finance meant they had missed out on an average of £20 million in revenues and an average of 11 new contracts. These would have enabled each firm to create ten new jobs.

These figures suggest that the 23,000 mid-sized manufacturing businesses in the UK have collectively missed out on 163,000 contracts and these would have created 175,000 jobs and £183 billion in revenues.

What’s more, our research shows that difficulties in raising finance also prevent 70 per cent of firms from investing in new equipment or technology. Half (50 per cent) have also been held back from entering new markets and 45 per cent have been prevented from moving to a new site or premises. When manufacturing is so critical to the UK economy, this isn’t good enough.
UK mid-sized manufacturers are not able to grow to their full potential without greater access to finance. But that finance has not been available as traditional banks are too often unable to help. Helping individual businesses unlock growth along the manufacturing supply chain would help tackle the UK economy’s productivity challenges.

Mid-market firms can have a disproportionate effect on growth and job creation in the economy as a whole, but first they need to be understood as individual businesses. It takes time and effort to understand a firm’s specific challenges and identify how to help them. This must then be underpinned by a range of flexible financial solutions to help shape the right answer. This might mean manufacturers using asset-based lending where they raise money against the invoices they have issued, or against stock that they hold. Or these businesses might be able to raise finance against the plant and machinery they have or are looking to get. Freeing up these assets can help provide the finance that businesses need to fulfil new orders and grow.

To make it easier for firms to raise finance, financial providers should be straightforward to deal with and speak the same language as their customers. Wyelands Bank was set up to help firms address these issues. We focus on getting to know the customers we work with so we can tailor the solution to the specific need.

Two recent deals prove the appetite for the way we do business. The first is a seven-figure asset-based lending deal for a precision stainless steel supplier and second a $12m trade finance deal for a global peanut supplier. In both cases, our deals will free up working capital, enabling these businesses to take on new orders and invest for the future.

The importance of the mid-sized business Mid-sized firms, turning over £10 million – £300 million, are too small to receive bespoke support from large high-street banks and often too big for peer-to-peer lenders. What’s more, these businesses are also often too large to benefit from attention that is rightly given by policy makers to small businesses. Yet they are generally not large enough to benefit from the economies of scale of bigger corporates.

According to BDO, the business advisory firm, over the past five years mid-sized businesses have delivered revenue growth of 32 per cent and profit growth of 45 per cent. This compares with FTSE350 companies whose revenues have shrunk by 0.6 per cent and whose profits have fallen by 40 per cent in the same period. Over that time, small business revenues fell by two per cent though profits rose by six per cent.

BDO also shows that growth in these firms has created more jobs than large and small businesses combined. In the last year, mid-market firms created 534,900 new jobs compared with 191,000 by small businesses and a loss of 157,000 by the FTSE350. By better understanding these businesses, we can help identify how they can access finance to bring their plans to life now and in the future. Our approach is innovative yet simple. We give customers direct access to decision makers. In enabling greater access to finance Wyelands Bank will help the UK’s mid-sized manufacturers to trade, grow and create jobs.

Ian Flaxman
Ian Flaxman is managing director, working capital solutions, Wyelands Bank. Wyelands Bank works with businesses to support industrial growth and enable them to trade more easily around the world and to create jobs. It supports small and medium businesses by providing the finance they need to trade effectively, filling a vital gap in the market.