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Lack of finance ‘costs UK auto firms £25bn in lost revenue’

The UK’s mid-sized automotive manufacturers could be missing out on up to £25 billion (US$32 billion) in revenues due to insufficient access to finance, according to research from Wyelands Bank.

Wyelands, previously known as Tungsten Bank and acquired in 2016 by Indian industrial entrepreneur Sanjeev Gupta, focuses on finance for small and medium businesses. Earlier this month, Gupta completed an acquisition of Diamond Bank UK – a subsidiary of Nigeria’s Diamond Bank – which will in future be known as the Commonwealth Trade Bank.

Wyelands Bank says it is critical to unlock growth so small and medium-sized automotive manufacturers can trade, grow and create jobs.

Its research covered UK mid-sized automotive manufacturers with annual revenues of between £10 million and £300 million, with 96% of firms surveyed stating that they are held back because of a lack of finance.

Each automotive firm said that difficulties in raising finance meant that on average they missed out on £24.8 million in revenues and an average of 24 new contracts, which would have enabled the creation of 21 new jobs.

Extrapolating these figures suggest that 1,605 mid-sized automotive businesses in the UK have collectively missed out on 24,284 contracts, which could have created 11,802 jobs and around £25 billion in additional revenues.

Tackling low productivity

The research also suggests that difficulties in raising finance prevent 82% of automotive firms from investing in new equipment or technology, while 63% have also been held back from entering new markets and 53% have been prevented from moving to a new site or premises.

“Our research shows that UK mid-sized automotive manufacturers are not able to grow to their full potential without greater access to finance,” said Iain Hunter, CEO of Wyelands Bank. “But that finance has not been available as traditional banks are too often unable to help.

“Helping mid-sized automotive businesses unlock growth would help tackle the UK economy’s productivity challenges. Mid-market firms can have a disproportionate effect on growth and job creation, but first, they need to be understood as individual businesses.

“It takes time and effort to understand a firm’s specific challenges and identify how to help them. This must then be underpinned by a range of flexible financial solutions to help shape the right answer.”

Beyond the automotive sector

Wyelands also researched UK mid-sized manufacturers in other sectors and found that 89% reported being held back due to a lack of finance. This indicates that the 23,000 mid-sized manufacturing businesses in the UK have collectively missed out on up to 163,0000 contracts that would have created 175,000 jobs and £183 billion in additional revenue.

Accountancy and business advisory firm BDO has reported that over the past five years, UK mid-sized businesses have delivered revenue growth of 32% and profit growth of 45%. This compares with FTSE350 companies whose revenues shrank by 0.6% and whose profits fell by 40% in the same period. Over that time, small-business revenues fell by 2% although profits rose by 6%.

BDO also shows that growth in these mid-market firms created more jobs than large and small businesses combined. In the past year, these firms created 534,900 new jobs compared with 191,000 generated by small businesses and a loss of 157,000 by the FTSE350.


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