Inside Newsletters - Manufacturing - September 2023

MANUFACTURING

Business Sentiment Index

Diving into the surveyed statistics of the Manufacturing industry

Meet the Expert

Meet our industry specialist, Grant Fairley, Area Sales Manager

2023 Issue 2

Welcome to Inside Manufacturing I am delighted to bring you the latest news from the Manufacturing business. As always, this issue focuses on the current issues affecting Manufacturing 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 Manufacturing SMEs attitudes to funding. A key finding from this survey is that only half of Manufacturing firms are 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 the finance options we have to offer and how they could work for your business, 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 Manufacturing and Engineering SMEs following the challenges of rising inflation,

increasing energy costs and higher interest rates.

On page 6 we meet QCT, an engineering firm who has taken accuracy to a new level with their range of coordinate measuring machines. Read on to learn how our Finance for Industry team have assisted this business as a finance provider.

Finally, on page 7 we have our ‘Meet the Expert’ feature. Grant Fairley is an Area Sales Manager and industry expert within our Finance for Industry 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

Steve Gee CEO, Industrial Equipment Division

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 Manufacturing. 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 only half of Manufacturing firms are 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

Impact of energy price rises

A third of Manufacturing 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, compounded by significant energy price rises, has had a major impact on businesses in all sectors, including Manufacturing.

56% 40% 77% 63%

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

have delayed their investment decisions because of market uncertainty.

Unfortunately, 47% of Manufacturing respondents to our survey stated they had missed a business opportunity in the last 12 months because of a lack of available finance.

47%

of firms in the industry needing to take out finance just to cover higher energy costs.

67%

of business owners disclosed that their energy bills had risen.

59%

stating it had impacted their profitability.

91%

have implemented various energy-saving measures.

Interestingly, well over half of firms polled said they’d consider moving to a four-day week to save on energy costs, which is well below the UK average of 57%.

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

closeassetfinance.co.uk

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Cautious return to confidence for Manufacturing and Engineering SMEs 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 rate 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 Manufacturing and Engineering businesses’ priorities, which are managing costs (29%; UK: 26%) and achieving growth (22%; UK: 28%) well ahead of issues like paying down debts (10%; UK: 9%) and business consolidation (9%; UK: 9%).

BSI scores - June 2020 to May 2023 Research Date

BSI Score UK

BSI score Manufacturing and Engineering

May-23

20

26.5

Dec-22

11.5

12.5

Jul-22

14.25

18.25

Feb-22

27.9

38

Sep-21

31.75

40.5

April-21

28.63

37

Appetite for investment Overall, the appetite to invest remains strong, as it was at the end of 2022, with 83% (UK: 75%) of Manufacturing and Engineering firms looking to seek funding for investment in the next 12 months. your business plan to seek funding Q Does for business investment in the next 12 months?

UK Manufacturing & Engineering

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Yes

No

May-23

75%

25%

Dec-22

76% 24%

May-23

83% 17%

Dec-22

83% 17%

Missed opportunities The number of Manufacturing and Engineering companies that have missed business opportunities because of a lack of available funding stands at 47% (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 12 Q Have months, due to lack of available finance?

Yes

No

UK

45%

55%

Manufacturing & Engineering

47%

53%

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%.

Confident economy Concerned will grow economy will slow UK Manufacturing & Engineering

There won't be a significant change

May-23

43%

46%

11%

Dec-22

36%

55%

9%

May-23

49%

43%

8%

Dec-22

38%

55%

7%

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

closeassetfinance.co.uk

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Case Study:

Taking accuracy to a new level – QCT QCT (Quality Control Technology) are the UK's largest stockists of quality new and fully refurbished CMMs (Coordinate Measuring Machines). Finance For Industry recently paid them a visit at their impressive facility in Derby and spent time with them asking about their history and where they see themselves in the future…

Tell us about the history of QCT? QCT have been in business for 31 years. We initially developed our own CMM operating software, and quickly realised we needed to develop our own CMM hardware interface for manual and CNC CMMs, which allowed us to retrofit or upgrade all makes of CMM. We are now many generations of both software and hardware further on.

We manufacture our own machines in the UK, (Quantum MK 4) and are UKAS accredited to carry out ISO10360-2:2009 and ISO 10360-5:2020 calibrations. We also offer service and repair of all makes of CMM. QCT’s original owners have all now retired, and the company was subject to a management buyout from senior employees within the business, Lee (27 years at QCT), Garry (12 years) and Scott (26 years).

Tell us about your products We design and build our own CMM, the Quantum 4, (the 4th generation of QCT CMMs) which is available in a variety of frame sizes as both a manual or CNC operated machine. They are all supplied with QCT’s own interfaces and CMM software, Inspect3D Pro64.

Another new product available from us is the Kreon Ace-Arm, which is supplied with a standard probe or laser options.

What are your unique selling points?

Customers quickly feel reassured when they visit our state-of-the-art facilities in our new building and we show them our workshop, subcontract and calibration areas. We are a ‘one stop shop’ - everything we add to a

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CMM is developed by us, including interfaces, software and refurbishment. We are not reliant on buying in software solutions, as our industry-leading Inspect 3D pro software demonstrates. Being self-reliant reduces our costs, which we pass on to our customers because we don’t have third parties to pay.

As well as our new machines, we also sell a large range of Refurbished CMM’s from Mitutoyo, Hexagon and Zeiss to name but a few. They are sold fully retrofitted with the same equipment and software as our Quantum 4 and fully backed up with a full 1-year warranty. A lot of the OEMs will now not support older frames and will insist customers buy new machines. We know we can extend the life of these high quality CMMs by 20 years or more with careful maintenance and, more importantly, with no loss of performance. We also retrofit our equipment onsite onto most makes of CMM, breathing new life into older machines and saving our customers a substantial amount of money at the same time.

How do you typically work with customers?

Our service engineers have access to the latest equipment and diagnostic tools, we respond to customers’ needs and service requirements with a ‘can do’ attitude, our highly skilled workforce is kept up to date with industry requirements and technology.

We pride ourselves on customer support from the very first contact - we don’t force a product onto a customer. We listen to their request and suggest the best solutions for each requirement.

Our technical salespeople are engineers first.

In many cases we’ve guided our customers to a far simpler or cost efficient solution than they had been advised they needed by other suppliers elsewhere.

We want the customer relationship to be right from the start and build customer confidence in QCT. We aim to discuss and understand our customers’ requirements and supply them with a cost-efficient solution in as short a lead time as reasonably possible.

What is FFI’s role?

FFI are now our go-to provider for finance when requested by one of our customers.

They are assured when financing a QCT CMM, (new or refurbished), that our CMM portfolio can meet the most demanding of customers applications. Backed up with a 12-month warranty, QCT can confidently stand by our CMM products with proven accuracy via UKAS calibration procedures to back this up.

It’s great knowing we can point a customer to a highly professional company like FFI and they will help all they can to create the best package for a potential customer.

Contact the team today by visiting financeforindustry.co.uk

Meet the Expert:

Grant Fairley Area Sales Manager

Grant Fairley is an Area Sales Manager and industry specialist within our Finance for Industry team. Here he discusses the favourite part of his role and his predictions for the sector over the coming 12 months.

Briefly tell us about your role and what you do…

them through my knowledge and experiences gained in the manufacturing industry.

I am an Area Sales Manager for Finance for Industry, part of Close Brothers Group.

I specialise in the funding of manufacturing equipment using asset finance.

Give us an example of a deal structure that demonstrates how you can you help a customer

What was your journey to Close Brothers Asset Finance?

I trained as an Engineer in the defence industry before progressing on from that role to sell CNC machines. Following on from this I moved into the world of finance for Manufacturing businesses which ironically means that I now finance those same CNC machines for our customers that I used to sell.

What’s the favourite part of your role?

The favourite part of my job is being in front of customers, in their premises and factories.

It allows me to look at what assistance I can give them through different finance options, I can also see the added benefit I can bring to

We were able to offer a new customer a very low-rate finance deal through one of our targeted vendor accounts. When I went to sign the documents I asked for a factory tour, during the tour I noticed that a lot of the machinery was specialist and high value. After signing the documents with the customer, I mentioned that we have the facility to raise funds against existing assets, this led to a re-financing deal in the region of £4million.

I also had another customer who was looking to manufacture similar parts but for a different industry. I introduced the businesses to each other, and they are now working together.

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

I expect that given the current climate the cost of machinery will go up; my customers are also experiencing tighter budgets than they have before. However, historically when times have been tough, Close Brothers have worked with our customers continuing to offer the support they need, I don’t expect that to change in the next 12 months.

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

In the last couple of months, I have received orders from both companies to the value of around £1m.

closeassetfinance.co.uk

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Combat rising costs Our team of experts can help you defeat the mounting cost of doing business.

We offer a range of flexible options that can allow you to: • Unlock the value of existing assets • Invest in new equipment • Create positive cash flow Our quick lending decisions and industry knowledge, enable our customers to unleash the value in their business.

Contact us today to find your superpower. closeasset.co.uk/manufacturing

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.