It’s been a tough year for manufacturers, just as it has been for so many businesses. Manufacturing output has fallen off a cliff as new orders took a nosedive and existing contracts were deferred or cancelled. But there are signs that things are now starting to stabilise, and optimism among businesses is bouncing back.
Output in the three months to January stabilised (-2% from -15% in October), according to the CBI’s quarterly SME Trends survey. With this turning of the tide comes hope. The business confidence index, compiled by the ICAEW accountancy body from a survey of 1,000 firms, showed confidence for the year ahead rising from -19 in the fourth quarter of 2020 to +10 in the first quarter of 2021.
Michael Izza, the ICAEW’s chief executive, said 2020 was “an unparalleled struggle for business”, but the mass rollout of a vaccine and a Brexit trade deal had provided the foundations for a recovery in 2021.
However, manufacturers are still being cautious. Manufacturers expect investment in buildings (-23%) and plant & machinery (-11%) to be cut back over the next year, albeit to a lesser extent than in 2020.
Will lack of investment hinder manufacturers’ recovery?
The government’s road map to take England out of lockdown is expected to provide the necessary impetus and improvement for the economy by the summer. Manufacturers, like all businesses, will be looking to grasp any and all opportunities this brings.
Understandably, manufacturers are playing it safe when it comes to new investments in order to protect their cash flow. But being too cautious could hinder their ability to bounce back from their pandemic-induced slump.
Demand uncertainty (an increase of 61%) remains the leading factor limiting capital expenditure. But there is a way that manufacturers can play it safe while continuing to invest in their business: asset finance.
What are the benefits of asset finance?
Asset finance provides funding for most equipment without the need for a large cash outlay, preserving other lines of credit such as commercial loans and overdrafts.
Asset finance providers, like Shire Leasing, give your business the ability to fund the equipment you need in a way that suits your company’s specific requirements. Your charges and monthly payments are agreed and fixed at the beginning of the contract, meaning less uncertainty for your business – you can make a cash flow forecast knowing exactly how much you will be spending on new equipment.
Shire Leasing will help you to find the most suitable financial product for your business. This could be a hire purchase (acquire an asset while paying for it in instalments over an agreed timescale), leasing (use the equipment you need without having to buy it outright), refinancing (realise the value of existing assets on your balance sheet), or another type of contract that may be low start or seasonal payments for example.
As well as spreading the cost of acquiring new equipment and protecting existing lines of credit, asset finance agreements can often be offset against pre-tax profits.
So, in anticipation of a time when your business can stop ‘playing it safe’ and the economy opens back up again, speak to Shire Leasing about your options. Supported by the British Business Bank, we are committed to supporting British businesses and have helped over 60,000 customers since 1990. Contact us today.
