• Manufacturing the future


    With Lloyds Bank on target to meet its £1bn lending commitment to the manufacturing sector, we talk to WILL STIRLING, Editorial Director of The Manufacturer, about the importance of access to funding - and the value of a bold outlook.

    “The acid test for the Funding for Lending Scheme (FLS) will come later this year,” asserts Will Stirling, Editorial Director of The Manufacturer. “The scheme was only launched last autumn and it takes time for industry to respond and the impact to become clear.”


    Having hit £700m at the six month mark, Lloyds Bank is on track to meet or exceed its £1bn manufacturing target under the commitment as part of its wider strategy of supporting UK businesses. The success of the FLS and other grants is, of course inextricably linked to demand.


    Driving demand 


    “Demand for finance comes down to confidence,” says Will. “However, a broader issue is around the culture of manufacturing. There’s a gap between leaders who are good at efficiency and running plants, spurred on by accountants focused on sweating assets – a typical ‘lean’ manufacturer – and those with a more progressive mindset, who can focus on global market competitiveness, 21st century processes and who see that investing in the next piece of kit is important to drive growth.


    “If you combine a limiting mindset with economic uncertainty, the appetite for borrowing becomes significantly reduced. But so too does the opportunity for growth.”


    Much depends on willingness to invest, but Will clearly sees a need to create awareness of the availability of funding and to simplify applications.


    “There’s an obsession among lobbyists around access to finance, but we’ve seen that in previous recessions. A really good business with a strong business model is very likely to get a loan. It’s just harder, and perceived as extremely hard, if you’re not.


    “There’s an issue around awareness of schemes like FLS or the Enterprise Finance Guarantee, but companies focused on surviving don’t necessarily have the manpower to seek out grants or undertake paperwork that won’t guarantee funding, or won’t deliver it in time to make a difference. That needs to change – we need to drive up awareness and speed of delivery.”


    Managing cash 


    According to Will, what’s often more important is cash flow.


    “It’s absolutely imperative,” he remarks. “Many businesses require access to loans for all sorts of capital requirements – but for others what they really need is simply to be paid on time. Your order book might be fairly full, but if your customers have pushed back to 90-day terms, you could fold on day 85 because you’ve run out of money. Big businesses have a responsibility to manage their supplier relationships in a way that doesn’t create unmanageable pressure along the supply chain.”


    In addition to changes in culture, access to finance and overcoming cash flow issues, what other support could make a difference to the industry?


    “Access to longer-term funding would be an advantage,” he says. “The change to capital allowances that has been passed is a big incentive to invest. R&D tax credits and further funding for UK Export Finance (UKEF) is helpful, and overall the government has shown itself pretty sympathetic to manufacturing. If you include the lower corporation tax rate with the tax allowances, to manufacture in Britain now is almost as tax efficient as doing it in Ireland.”


    Chasing higher performance 


    For manufacturers, the key is to build on this support by driving higher performance and proactively seeking out opportunities for growth.


    “Regardless of external support, and there is a lot at the moment, much boils down to changing the ‘make do and mend’ mindset often seen in British manufacturing. If we change that to a mindset of dynamic growth and productivity, all of these initiatives will be tapped more vigorously.


    “Manufacturing managers, by their training, are very good at optimising limited resources – they’re not always natural risk-takers. Growth comes from being brave enough to invest in people, products and processes. We must be bolder.”


12/3/2020 7:34:21 AM