Inside Newsletters - Construction & Recycling - September 2023

INSIDE

CONSTRUCTION

& RECYCLING

Business Sentiment Index

Diving into the surveyed statistics of the Construction industry

Meet the Expert

Meet our industry specialist, Sophie Roberts, Area Sales Manager

2023 Issue 2

I’m delighted to bring you the latest business news from the Construction & Recycling division. As always, it focuses on the current issues affecting SMEs, whilst also showcasing how Close Brothers Asset Finance has supported businesses within the industry and will continue to do so.

We start this issue, on page 3 with a piece looking at Construction SMEs attitudes to funding. A key finding from this survey is that nearly half of Construction firms are not aware of asset finance, meaning many haven’t unlocked the benefits this can bring.

Asset finance is an alternative form of funding used by businesses to obtain the equipment they need to grow. In effect, it utilises the residual value in an asset to either pay for or put down a deposit on another piece of kit. Our experts consider all aspects of a customer’s business and then recommend asset finance solutions that best suit their cash flow and long-term goals.

Common examples of the asset finance products we offer are Hire Purchase, Refinancing (Capital Release), Finance Lease and Operating Lease.

We pride ourselves on not only knowing about asset finance and being able to tailor suitable financial solutions, but our specialists have also worked within the industry themselves.

By working closely with businesses, our team of industry experts see the potential for growth and provide straightforward asset finance solutions to support this.

To find out more about any of our finance options contact the team today.

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 the cautious return of confidence for Construction SMEs following the challenges of rising inflation, increasing energy costs and higher interest rates.

On page 6 we have a case study featuring Essential Access Platforms, this powered access hire company were able expand their fleet with the help of a Hire Purchase agreement, provided by Close Brothers Asset Finance.

Finally, on page 7 we have our ‘Meet the Expert’ feature. Sophie Roberts is an Area Sales Manager within our Construction and Recycling team, here she discusses her predictions for the next 12 months across the industry and the favourite aspect of her role.

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

Andy Sagar

Managing Director, Construction & Recycling

Close Brothers Asset Finance launches 4th Sales Academy Close Brothers Asset Finance is delighted to announce the return of its highly successful and industry-leading Sales Academy, which is designed to attract new and diverse talent into the sector from across the UK. There are six positions available in this year’s Sales Academy, and in keeping with previous criteria, experience in finance or sales is not a prerequisite. Close Brothers Asset Finance is looking to attract enthusiastic candidates from a range of backgrounds who want to build a successful career in sales and become specialists in one the many sectors the funder supports, including Renewable

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Energy, Engineering, Print and Agriculture.

Steve Gee, CEO of Close Brothers Asset Finance’s Industrial Equipment division: “We are very proud of our specialist business model and want to build on the outstanding success of the first three Sales Academies, which has seen many of the previous ‘graduates’ fully integrated into the Asset Finance and Leasing sales teams and leading very successful careers in their chosen sectors.”

“This is an incredible opportunity to be trained by an industry leader and mentored by an experienced Sales Manager for 'on the road' training. Following their training

period, successful applicants will concentrate on building a customer base, territory and business plan, with full assistance from a mentor.”

Attitudes to funding At Close Brothers Asset Finance we regularly survey business owners in the sectors we fund, including Construction. Taken from our latest survey, in this piece we focus on attitudes to ‘funding’, finding out, for example, if firms are planning on seeking funding, and if they’re confident about getting access to the loans they need to grow their business.

A key finding is that nearly half of Construction firms are not aware of Asset Finance, meaning a large number still haven’t taken advantage of the many benefits to be gained from leveraging value from their existing assets.

Access to funding

Cost of borrowing

A quarter of Construction business owners say getting access to funding is a ‘major challenge’ and more difficult now than it was a year ago.

The increases in the cost of doing business has had a major impact on businesses in all sectors, including Construction.

50% 30% 69% 46%

tell us it’s a ‘moderate challenge’ and as difficult now to access finance as it was a year ago.

admit to having been declined access to finance by a bank in the last six months.

of Construction firms, despite the challenges are planning on seeking funding for investment in 2023.

have missed a business opportunity in the last 12 months because of a lack of available finance.

Interestingly, 50% of Construction SMEs are confident the economy will grow in the coming 12 months, against 38% who expect a further slowdown of economic activity. The rest anticipate no change.

53% 39% 50% 49%

have seen an increase in their cost of borrowing.

of Construction SMEs have switched funders because of increased interest rates.

have considered alternative forms of finance because of increased interest rates.

of those surveyed think interest rates have peaked.

Unfortunately, 59% of Construction respondents to our survey have had to increase their prices to cover the increased cost of borrowing.

For more industry insights, please visit closeassetfinance.co.uk

closeassetfinance.co.uk

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confidence continues to fall across all sectors, including Construction Close Brothers Asset Finance’s Business Sentiment Index (BSI), which measures SME business confidence, has risen for the first time since September 2021 following three consecutive falls, and a low at the end of 2022. These were caused, in the main, by rising inflation, energy cost increases and higher interest rates.

Despite the headwinds still being faced by small and medium-sized firms and inflation stubbornly remaining in double digits, wholesale energy prices have fallen from their summer 2022 peaks, and there appears to be more certainty about where interest rates rises are headed, all of which is helping firms plan with more assurance.

This change in confidence is better understood when looking more closely at Construction businesses’ priorities, which are achieving growth (29%; UK: 28%) and managing costs (26%; UK: 26%) well ahead of issues like paying down debts (9%; UK: 9%) and business consolidation (13%; UK: 9%).

BSI scores - June 2020 to May 2023 Research Date

BSI score UK

BSI score Construction

May-23

20

17.5

Dec-22

11.5

12.25

Jul-22

14.25

14.5

Feb-22

27.9

31.5

Sep-21

31.75

32.95

Apr-21

28.63

35.3

Nov-20

14.5

18.5

Jun-20

12.25

18.25

Appetite for investment The one positive is that, overall, over two-thirds of Construction firms are still looking to seek funding for investment in the next 12 months, up from July’s 64%.

This is reflected across all key sectors, with the most notable rise coming in Services, where the number of firms planning to seek funding has risen by 32%. your business plan to seek funding for Q Does business investment in the next 12 months?

UK

Construction

4

Yes

No

May-23

75%

25%

Dec22

76%

24%

May-23

73%

27%

Dec-22

71%

29%

Missed opportunities The number of Construction companies that have missed business opportunities because of a lack of available funding stands at 44% (UK: 45%) in May 2023.

While this is an improvement, these are historically ‘high’ figures – for example, in May 2022, 37% of UK respondents answered ‘yes’ to the question ‘have you missed a business opportunity in the last 12 months, due to lack of available finance?’.

It would appear businesses are concerned about impacting their cashflow by dipping into their reserves or taking out a standard loan and adding to their debt burden. you missed a business opportunity in the last Q Have 12 months, due to lack of available finance?

Yes

No

UK

45%

55%

Construction

44%

56%

Economic outlook Construction businesses are more negative than positive about the macro-economic outlook, and compared to the end of 2022, firms in the sector are slightly 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 36%.

UK

Construction

Confident economy will grow

Concerned economy will slow

There won't be a significant change

May-23

43%

46%

11%

Dec-22

36%

55%

9%

May-23

40%

47%

13%

Dec-22

36%

52%

12%

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 data 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

closeassetfinance.co.uk

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Case Study:

Hire purchase agreement helps powered access firm expand fleet

Essential Access Platforms Ltd (EAP) was formed in 2021 by a team of professionals who have extensive experience in the powered access industry. They offer powered access hire to a range of professionals and amongst their fleet available for hire are boom lifts, scissor lifts and spider lifts.

A growing hire fleet

Offering a suitable agreement

Close Brothers Asset Finance have built a strong relationship with the team at EAP, helping with several agreements since the business was formed in 2021. After these initial successful agreements, the business wanted to further expand by purchasing several new Snorkel powered access machines.

Simon was able to help EAP purchase the new Snorkel equipment through a Hire Purchase Agreement. By using Hire Purchase, the business was able to acquire the equipment whilst paying in instalments over time, allowing them to spread the cost of the investment.

The team at EAP approached Simon Knox, Regional Sales Manager at Close Brothers Asset Finance. Simon is highly experienced in the powered access industry, he worked closely with the business to understand their specific needs and requirements.

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A good result With the help of an agreement provided by Close Brothers Asset Finance, EAP has been able to acquire the new Snorkel equipment in a timely manner. The new equipment is now available to be hired out to customers.

Simon commented: “It has been a pleasure to work with the team at Essential Access Platforms on several finance agreements.

With the help we have been able to provide, the business has grown further and I look forward to working with them again in the future.”

“The whole team at Close Brothers Asset Finance has been great to deal with. Simon worked closely with us to understand our agreement requirements and put together a deal that has increased our cashflow and the size of our fleet. We would certainly look to work with Close Brothers again in the future.”

Christian Lang, Essential Access Platforms

Meet the Expert:

Sophie Roberts Area Sales Manager

Sophie Roberts is an Area Sales Manager and industry specialist within our Construction & Recycling team. Here she discusses her journey to Close Brothers and her predictions for the sector in the coming 12 months.

Briefly tell us about your role and what you do…

What’s the favourite part of your role?

large variety of needs and cater to almost any customer.

I’m an Area Sales Manager who works within the Construction & Recycling business, more specifically I am part of the newly formed Access Team. I visit dealerships and customers with the aim of helping their businesses grow through a variety of finance solutions.

My favourite part of the job is working with my customers to understand their business, this allows me to work with them to create finance agreements that help their businesses to grow and expand. I’ve been very fortunate to have had a helping hand in witnessing smaller businesses grow exponentially into amazing companies with huge futures ahead of them.

I’m very proud to have been a part of their timeline.

What are your top 2 predictions for your sector in the coming 12 months?

What was your journey to Close Brothers Asset Finance?

My first role was with BNP Paribas in their customer services team, within a year I moved to a sales and account manager role within another department. I was with BNP Paribas for nearly 7 years, when the Covid-19 pandemic hit, I was seconded to various different departments where I was able to learn a large amount about the life-cycle of a finance agreement. I then applied for a field sales role with Close Brothers Asset Finance which I was fortunately selected for.

Give us an example of a deal structure that demonstrates how you can you help a customer There are so many ways to structure a deal and some lenders can be specific about what is and isn’t allowed. The flexibility within Close Brothers to create deals where we can lend over a longer period of time or establish a non-traditional rental package is often helpful to customers. By allowing these non-standard deals we can accommodate a

It’s hard to predict just where we’ll be this time next year but I’m incredibly hopeful that the sector will continue to grow. I also think that the used market will become more prolific as we navigate through the longer manufacturing waiting times. I’m optimistic that we can continue to provide competitive funding within our industry.

Our teams are specialists in their fields and experts in asset finance. Contact Sophie and the team today by visiting closeassetfinance.co.uk/enquiry-form

closeassetfinance.co.uk

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SUPPORTING THE UK CONSTRUCTION INDUSTRY WITH ASSET FINANCE With specialist industry knowledge and tailor-made support, we offer a range of finance options which can: • Unlock the value of your existing assets • Let you invest in new equipment • Create positive cash flow for your business

Contact us today, we’re here to help closeassetfinance.co.uk/construction

Products and services are subject to eligibility, status, terms and conditions and availability.

All lending is subject to status and our lending criteria.

The right to decline any application is reserved.

Close Brothers Asset Finance is a trading style of Close Brothers Limited. Close Brothers Limited is registered in England and Wales (Company Number 00195626) and its registered office is 10 Crown Place, London, EC2A 4FT.