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New technology drives opportunity for UK manufacturers to boost productivity and profitability

New technology drives opportunity for UK manufacturers to boost productivity and profitability

Investment in new plant and machinery could help SMEs seize the opportunities from surging orders in the UK's manufacturing sector.

Two recent surveys conducted by the Confederation of British Industry (CBI) and the manufacturing trade body, EEF, found orders were increasing in the sector by up to 30%. This upward trend represents the strongest growth for almost 30 years and is primarily being driven by overseas customers taking advantage of a weaker pound.  

Rising demand could be the catalyst for UK SMEs to invest in the advances made through the increasing use of digitalisation in manufacturing technologies and machinery. New technologies' such as machine learning, Artificial Intelligence (AI), robotics and 3D printing are becoming more mainstream and available enabling manufacturers to boost efficiencies, productivity and profitability.

Are UK manufacturers in danger of being left behind?

Recent evidence suggests that UK manufacturers must continually invest to remain competitive. Countries such as Germany, the United States (US), South Korea and China are grasping these technologies as, what is being called the 'fourth industrial revolution' (4IR), takes hold.

Nowhere is this more evident than in the US where investment in new industrial equipment and software grew by more than 14% during the last year as firms sought to capitalise on growing global orders.

The EEF said in a December 2017 report on the impact of 4IR that modern systems and equipment are already changing the market. To meet customer expectations, 87% of manufacturers acknowledge that they have to invest in new technology to remain competitive while only 11% said they were currently geared up to take advantage of 4IR.

Technological advances are also central to the government's recently unveiled Industrial Strategy where they are seen as central to driving innovation and expanding the economy. It is estimated that 4IR could generate an extra £455bn and 175,000 jobs for the UK economy.

Financing investment

SME business owners seeking to grasp the opportunities of 4IR by investing in new assets face a key decision - how to balance maintaining a strong cash flow whilst ensuring access to working capital. Many often look to secure funding through a traditional route, such as high street banks, or use personal funds from directors.

However, a growing number of SMEs are finding alternative funding sources to be more flexible as Wesleyan Bank's SME Attitudes to Finance 2017 research highlighted. In the last year 51% of respondents had used asset finance solutions, compared with 37% the previous year, to pay over time for IT related expenditure and purchases of plant and machinery.

Specialist funders of commercial finance solutions to UK SMEs, such as Wesleyan Bank, offer advantages as they have extensive experience of supporting a variety of businesses. This enables them to offer bespoke short, medium and long-term funding products tailored to a business's needs and growth plans, allowing manufacturers to gain access to equipment and assets without the constraints of large upfront costs.

Alternative finance solutions ensure it is possible to spread the investment over a period, typically between one to five years, meaning cash can be retained within the business for a faster return on investment and breakeven points. This can also be a more tax efficient means of investing in new assets. 

Selecting the right financial partner with specialist knowledge of the manufacturing sector can act as a real stimulus for growth. New technologies offer immediate business advantages, transforming the productivity of SMEs so they can compete on a level playing field with larger, more established competitors.

More importantly, it means that SMEs can manufacture smarter products, increase capacity and streamline processes so they become more efficient and profitable. As the CBI report shows, the market is there for those who wish to take advantage of it and drive growth in 2018.

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

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