The FINANCILA — UK businesses are turning down contracts worth almost £2.3bn a year, due to a reluctance to invest in new capital equipment. Research by Lombard, has found that 40% of businesses have said no to new orders as they do not want to invest in the current economic climate.
According to The Royal Bank of Scotland Group, the low levels of investment mean that the UK now lags behind countries such as Austria, Switzerland, Turkey and Mexico in the use of machine tools, a key indicator of manufacturing investment. Using out-dated machinery is often a false economy through increased maintenance costs and lower efficiency.
Lombard's research also found almost half of those firms that did invest, used cash from their balance sheet, one of the most inefficient ways it could be done with only 14% using asset finance. Asset finance removes the risk for a business as it involves their finance provider taking the risk on the value of any new machinery falling. The asset financier also takes responsibility for the disposal and management costs associated with ownership of new equipment. Yet an alarming 72% of businesses admitted not knowing how asset finance works.
Alexander Baldock, MD, of Lombard, the UK market leader, said: "The economy cannot afford for businesses to turn down orders. Firms are letting their machinery sit idle rather than committing to investment as they don't want to use valuable cash. Yet, there is a ready-made and highly flexible solution in asset finance where the asset financier takes the risk on behalf of the company. This allows companies to get the very latest equipment they need without over-stretching."
Lombard is committing £1bn a quarter to The UK Capex Fund to get the UK investing for recovery. This is available on a fee free basis to encourage businesses to invest.