Warnings over 'rusting Yorkshire'
9 June 2010
South Yorkshire’s manufacturing industry could be literally rusting away because firms cannot afford to replace old equipment.
That’s the warning from a Barnsley-based asset finance broker, who says recent research shows that a quarter of small manufacturers have been unable to replace vital equipment because of cash-flow problems in the recession.
Jason Lincoln, director of Lincoln Finance, said: “Manufacturing has been particularly badly hit, but the problem doesn’t end there. Nearly a quarter of the hospitality industry said they were also struggling to find the money to buy new equipment and the negative effects have also spread to transport and agriculture.
“This research is national, but it is reflected here in South Yorkshire, with many SMEs struggling to get credit.
“It’s vital that as we come out of a recession businesses have the equipment they need for when demand picks up, but problems with falling profits and difficulty getting loans or overdrafts mean many have just made do with what they have. And that means in some firms equipment is literally rusting away.”
The research by the Open University Business School revealed that overall 16 per cent of SMEs have not been able to replace operating equipment during the recession, with six per cent reporting that it posed a risk to their business.
Other research by Oxford Economics showed that investment in equipment has fallen by more than in either of the two previous recessions.
“Overall this research is very worrying,” said Jason, who is based in Crane Moor. “Britain’s 4.7 million small businesses should be the engine room of recovery from the recession. They need to be in good shape.”
But Jason said it is not all gloom and doom, with the first signs of an upturn in investment by businesses using asset finance. This is where manufacturing plant, cars, vans and other equipment are procured by leasing or hire purchase, thus allowing businesses to avoid paying for equipment upfront.
Nationally asset finance has increased by about 11 per cent. Nearer to home Jason says he has seen a 26 per cent increase in the amount of deals he has brokered in the year ending May 2010.
“In many instances we have secured funding for clients where their own banks or previous finance house were unwilling to help. In fact our proposal acceptance rate has been more than 95 per cent during the past 12 months. So there may be light at the end of the tunnel for small businesses,” said Jason.
Lincoln Finance is an independent asset finance brokerage, which has arranged finance deals worth more than £16m since 2005.
NOTE TO NEWS EDITORS
The research was carried out by the Open University Business School (Recession effects on new equipment investment in SMEs) and Oxford Economics (role of leasing in the UK’s economic recovery). The figure of an 11 per cent increase in asset finance nationally is from the Finance and Leasing Association.