Inside Newsletter - Manufacturing - June 2024

MANUFACTURING

Business Sentiment Index

Diving into the surveyed statistics of the Manufacturing industry

Meet the Expert

Meet our industry specialist, Henry Ranshaw, Regional Sales Manager

Welcome to Inside Manufacturing

I’m delighted to bring you the latest news from the Manufacturing business. As always, it focuses on the current industry trends and how they are affecting SMEs, whilst also demonstrating the support Close Brothers Asset Finance has offered to businesses within the industry.

We start this issue, on page 3 with a Q&A with Richard Kirk and Chris Lillico. Richard and Chris were recently promoted to Managing Directors of the Manufacturing and Finance for Industry teams respectively. I wish them both every success and look forward to seeing them grow our business further.

On pages 4 and 5 you’ll find our Business Sentiment Index; our confidence tracker based on business owners’ views and thoughts on the industry. This update will look at how sentiment amongst Manufacturing firms has continued to rise for the third consecutive research period.

On page 6, we have a case study on Restormel Machine. This Cornwall based

CNC machine specialist was able to release capital from their existing assets to invest back in the business with the help of a tailor-made finance agreement provided by Close Brothers Asset Finance.

We pride ourselves on our ability to provide tailor-made finance agreements that are suitable for individual businesses. Our teams are specialists in their field, with many having worked within the Manufacturing industry themselves.

By working closely with you to understand your business, our team of industry experts see the potential for growth and can provide straightforward asset finance options to support this.

Asset finance can help businesses of all sizes get the equipment, vehicles and machinery they need. All without having to pay the full price upfront. It can be used for both new and second-hand assets, or as a way of releasing the value from those you already own.

Common examples of the asset finance

products we offer include Hire Purchase, Refinance/Capital Release, Finance Lease and Operating Lease.

To find out more about any of the finance options we have to offer and how they could work for your business, contact the team today on 01244 457 569.

Finally, on page 7 we have our ‘Meet the Expert’ feature. Henry Ranshaw is a Regional Sales Manager and industry expert within our Manufacturing team. Here he discusses his predictions for the next 12 months across the industry and the favourite aspect of his role.

We hope you enjoy the read and as always, we look forward to working with you in the future.

Steve

Close Brothers partnership with AMRC apprenticeship scheme

For nearly 10 years, Close Brothers has maintained a long-term partnership with the University of Sheffield’s Advanced Manufacturing Research Centre (AMRC).

Under the scheme, Close Brothers contributes up to 50% of the wages for the apprentices in the first year and 25% in the second year and covers all training costs.

Steve Gee, CEO of our Industrial Equipment Division explained a little bit more about the partnership:

“At MACH 2014 there were two main issues being discussed - access to finance and new blood coming into the engineering industry.”

“We came up with the idea of sponsoring young people to enter the engineering sector - SMEs were still reeling from the financial crisis (2008 onwards), which had impacted them a few years earlier.”

“We spoke to the MTA (Manufacturing Technologies Association) and they made the initial introduction to the AMRC – the rest is history!”

“I believe in giving young people an opportunity, while at the same time helping SMEs who may not yet have benefitted from having new ideas in their business. University is just one route available to young people – it’s a good one, but it’s not for everyone.”

“It’s great to support both the individuals and their employers. I would encourage other firms to support apprentices – we know first-hand what a hugely positive impact they can have.”

Steve Gee CEO, Industrial Equipment Division

Q&A with Richard Kirk and Chris Lillico

Richard Kirk and Chris Lillico were recently promoted to Managing Directors of the Manufacturing and Finance for Industry teams respectively. In this Q&A we find out a little more about them, their background, and their thoughts on the sector.

Tell us about your journey at Close Brothers that led to your new position

Richard Kirk: Prior to joining Close Brothers Asset Finance, I worked at another large funder specialising in Engineering asset finance for around 10 years. I then joined Close Brothers Asset Finance in October 2008 as an Area Sales Manager before being promoted to Regional Sales Manager and then Sales Director before finally being promoted to Managing Director.

Chris Lillico: I started as a Regional Sales Manager in 2009 and joined to set up a small corporate/middle ticket team to sit between the Asset Finance and Leasing teams. In 2013, I was appointed to the role of Sales Director and my team was merged with the ‘general’ Manufacturing team. In 2018 I was asked to take on the Finance for Industry brief and Sales Director before finally being appointed to my current role as Managing Director of FFI.

Manufacturing is a key sector for Close Brothers Asset Finance. Why is that?

RK: Manufacturing is always innovating – if you don’t invest, you get left behind. If businesses want to be successful, they need to invest in people, processes and technology, which could be CNC machinery or robotics, for example. The way we work is to establish long-term relationships with our clients, based on our shared expertise.

CL: Because of the good quality, hard assets, many of which have strong residual values and offer us good security. To be competitive, firms need to continue to

invest – while these assets do have good lifespans, firms understand that to move forward, you have to look to innovate. We have also supported this sector for a long time - as a business, we have over 30 years’ experience working with manufacturers and I, personally, have 25 years’ experience in the industry.

What is it about your team and how it operates that makes it unique in the marketplace?

RK: I’m going to focus on one of our USPs, which is the joint offering of Asset Finance and Invoice Finance for targeted acquisitions within the Manufacturing sector. If a manufacturer wants to take over another business, we have strong expertise working with firms to do just that and can provide a very competitive offering.

CL: We have several routes to market – one being the direct team, while with the FFI brand we have the vendor platform and relationships with a number of 3rd party lenders. This means we can offer equipment suppliers a ‘one stop shop’ for all their client base’s funding needs.

What plans do you have to grow your business?

RK: We have just taken on four highly experienced additional sales team members who have already hit the ground running. I’m really looking forward to the next few years as they embed into the business and serve our customers, existing and new.

CL: We’ve identified Commercial Mortgages as a key growth area. We know the demand is out there and we can

now start to meet that demand. There are over five million small to medium sized enterprises in the UK, many of which will require commercial property.

What do you think is the prospect for UK manufacturing?

RK: I’m very positive about the future of manufacturing in the UK. We are world-leading in so many aspects of manufacturing, and really do punch well above our weight, whether it’s in automotive, aerospace, nuclear, or food and drink – the list is endless.

CL: To compete on the global stage, UK manufacturing has always had to be very innovative and resilient, and this is part of the sector’s DNA, which is why, today, we are the standard bearer for manufacturing excellence. I’m very positive about the sector, as is Close Brothers Asset Finance, and we will continue to back businesses in this key sector, now and into the future.

What is the one message you’d like to give both customers and anyone wanting to work with us?

RK: We are keen to work with businesses who want to grow and innovate, regardless of where they are in their own business cycle. We partner with all businesses, whether they are new starts or established operators – and we also fund through all economic cycles, which is something we’re very proud of.

CL: Our doors are open for business and will continue to support businesses throughout the economic cycle, as we’ve always done.

Sentiment among Manufacturing firms continues to improve

Close Brothers Asset Finance’s Business Sentiment Index (BSI), which measures SME business confidence, has risen modestly for the third consecutive research period, with the Manufacturing sector maintaining its upward trajectory.

BSI scores - June 2020 to May 2023

Appetite for investment

Manufacturing firms’ appetite to invest dipped significantly from a high of 81% in September 2023 to 69% in January 2024 as the UK economy continues to perform sluggishly and interest rates remain at their highest levels for some time.

Q Does your business plan to seek funding for business investment in the next 12 months?

No

Missed opportunities

The number of companies that have missed business opportunities because of a lack of available funding continued to fall and this latest figure is in line with the more normalised levels achieved for this question, last seen in May 2022.

At 40% (Sept 2023: 47%), the Manufacturing sector’s responses are very much in line with that of the UK, as a whole.

Q Have you missed a business opportunity in the last 12 months, due to lack of available finance? Yes No

Economic outlook

Manufacturing and Engineering businesses are more positive than negative about the macro-economic outlook, ‘outperforming’ the consolidated UK sentiment. Compared to the end of 2022, firms in the sector are considerably more optimistic than they were.

This indicator has contributed most to the decline in the overall BSI; for example, in November 2021 75% of respondents were positive about the economy – by December 2022 this had fallen to just 38%.

QHow would you best describe your business's economic outlook for the coming 12 months? Confident

Predicted business performance

Reflecting the overall BSI result, predictions about future business performance rose slightly. What hasn’t changed is that most firms expect to continue treading water in 2024, with their prospects remaining unchanged.

Q In general, how do you expect your business to perform over the next 12 months?

Score calculation

The BSI is based on the views of 900 business owners and senior members of the UK's business community and calculated from date charting their:

• Appetite for investment in their business in the coming 12 months

• Access to finance and whether they’ve missed a business opportunity through lack of available finance

• Views about the UK’s economic outlook

• Thoughts on their likely performance in the coming 12 months

Case Study: Refinance agreement helps CNC machine specialist expand business

Find out how Close Brothers Asset Finance worked with a Cornwall based CNC machine specialist to release capital from their existing assets to invest back in the business.

Background

Restormel Machine specialises in the CNC machining of precision components for companies across a wide range of industry sectors including automotive, medical and food production. The business is a long-standing customer of Close Brothers Asset Finance who have worked with them on several agreements over the years.

Challenge

The business was looking for a cash injection to invest in improvements across their business to help them develop further. Recently they expanded their premises to include an additional 6,000 square feet of space. The business also wanted to purchase equipment to facilitate a more efficient direction of operating.

To raise the capital, Managing Director of Restormel Machine, Barry Kennett contacted Jonathan Weston, Regional Sales Manager with Close Brothers Asset Finance for a funding solution.

Solution

Jonathan suggested using a refinance product against Restormel’s existing machinery. By using a Sale & HP Back agreement, the business was able to use multiple CNC machines as collateral, helping them to secure the necessary funds. Jonathan's many years of experience ensured the tailored structuring of the agreement to suit the specific needs of the business.

Outcome

This collaboration demonstrates the power of tailored financing solutions. Through the Sale & HP Back agreement, the business secured funding to help them embrace sustainability measures and expand their physical footprint, ensuring sustained growth and competitiveness.

"Restormel Machine's commitment to growth and innovation in the CNC industry is impressive. The agreement we have structured with them exemplifies the value of tailored finance solutions in driving meaningful progress." — Jonathan Weston, Regional Sales Manager, Close Brothers Asset Finance

"At Restormel Machine, we believe in strategic investments to bolster our capabilities. Jonathan and the whole team at Close Brothers Asset Finance have helped to enable us to make crucial advancements, setting the stage for our continued success." — Barry Kennett, Managing Director, Restormel Machine

Contact the team today by visiting closeassetfinance.co.uk/ manufacturing

Meet the Expert:

Henry Ranshaw Regional Sales Manager

Henry Ranshaw is a Regional Sales Manager and industry specialist within our Manufacturing team. Here he discusses the favourite part of his role and what he thinks 2024 holds for the industry.

Briefly tell us about your role and what you do…

I am a Regional Sales Manager within the manufacturing team at Close Brothers Asset Finance, managing a team who service London and the South East of England. My role consists of assisting my team in building relationships and structuring tailored finance packages, as well as looking after my existing and new customer base. Close Brothers Asset Finance is a firm believer in taking the time to visit customers face to face, which really helps us to understand specific needs and requirements. This ensures we can put together bespoke funding packages that really help businesses maximise their investments. I spend a lot of time out and about visiting businesses, building relationships and increasing my industry knowledge which keeps me up to date with any changes or shared challenges within the sector, which I can then use to further assist my customers.

What

was your

journey to Close Brothers Asset Finance?

I joined Close Brothers Asset Finance in September 2015 as part of the first Sales Academy cohort. This was a big change to my previous line of work as a foreman within groundworks as a heavy machine operator. As much as I enjoyed operating big plant, I wanted to move into a role that was more relationship driven, so when the opportunity arose for the Sales Academy, it was too good to miss. I graduated from the Sales Academy as an Area Sales Manager where I spent the next few years building my network of customers and industry specialists, progressing to my current role of Regional Sales Manager.

What’s the favourite part of your role?

Manufacturing is such a broad sector, which ranges from engineering and woodworking to food production and textiles. This variety means that no two days are the same. I enjoy learning about each business and the journey they took and this job has given me the opportunity to gain an understanding of lots of sectors within UK manufacturing and just how much crosses over into our everyday life and the work that goes on behind the scenes. I enjoy challenging and complex finance structuring, whether that be facilitating management buy outs, multi asset refinancing to raise capital or ‘story book lends’ as these really require fully understanding day to day operations and future plans for the business. Witnessing longstanding relationships develop into business success stories is a personal highlight for me. Knowing that I have played a part in assisting growth for businesses across the UK is extremely fulfilling.

Can you give us an example of a time where asset finance has helped one of your customers?

We recently tailored a finance package for a well-known fresh juice manufacturer who had experienced rapid growth with large orders from major UK retailers. This meant that they needed to heavily invest in new factory equipment under a strict deadline to meet the requirements of the new contracts. The customer had machinery coming from the UK, Europe and the USA as well as a move to a new factory to contend with. To ease cash flow, we structured a low start payment profile, increasing in increments of 3 months for

the first year of the agreement to allow the machinery to be installed and the new contracts to commence before standard repayments continued. We also included all their previous existing finance agreements into the new offering, further reducing their monthly commitments and ultimately putting less strain on cash flow during a huge turning point for the business. This is one of many examples where we have really listened to specific requirements and understood the business’s need when shaping finance offerings.

What do you think 2024 holds for the Manufacturing industry?

What do you think 2024 holds for the Manufacturing industry?

The UK manufacturing industry is strong, rising from 9th to 8th in the global manufacturing rankings in 2023 and we are seeing a real up-turn following the dip caused by the pandemic. There is a renewed confidence in businesses investing in new machinery to service increased workload across all aspects of manufacturing which shows continued growth. I am seeing a big growth in the food and drink sector which is also confirmed as the largest division with the UK manufacturing sector at 21%. I am looking forward to the year to come, establishing new and continuing existing relationships with SMEs across the UK.