Banks and funders urged to support manufacturers out of recession » Bill Payments » 24dash.com

‘Cash will be king’ for West Midlands manufacturers looking to make the most of the first signs of economic recovery it was predicted today by the region’s leading industry support body.

Simon Griffiths, Chief Executive of the Manufacturing Advisory Service-West Midlands, is urging banks and other lenders to help the sector bounce back from the downturn by increasing access to finance and, importantly, at reasonable rates.

The chartered mechanical engineer believes companies in the area are being hamstrung by a lack of refinancing options and unfair lending conditions, which is disrupting day-to-day operations, the purchasing of raw materials, supplier payments and, in some instances, firms looking to expand and create jobs.

“Recent surveys by the EEF and CBI predict an upturn in manufacturing over the next six months and whilst we should all welcome this news, we have to be mindful of history telling us that a lot of firms fall victim of the growth that follows a recession,” explained Simon, who spent more than 25 years with Land Rover and GKN.

“That is why it is so important that banks and other lending institutions treat manufacturers fairly and ensure they have the same access to finance and loans as other sectors so they can continue to trade, win new business and move a sector that employs 330,000 people locally back into positive territory.”

He continued: “We have lots of anecdotal information about credit insurers refusing to guarantee new orders and funding only being offered at unreasonable rates.

“This I feel is beginning to change in recent months and can only be helped by the government’s desire to force banks to lend to SMEs. We’re not asking for favours or hand-outs, just a level playing field so that our well run and often world class businesses have the best possible chance to lead the West Midlands out of recession.”

The Chief Executive of MAS-WM was also keen to point out that funding will be vital in making sure our companies continue to innovate, bring out new products and capitalise on the massive opportunity presented by the strength of Sterling against the Euro.

Recent movements in the exchange rate mean that West Midlands manufacturers are now some 30% more competitive than a couple of years ago, but once again need the money and credit insurance in place to make exporting viable.

Mike Rogers, joint Director of R&M Metal Finishing in Lye, has experienced the difficulties of accessing finance firsthand after seeing his business suffer from a significant drop in sales and bad debts left behind by Wagon and LDV.

“Fortunately, our ability to take core expertise into new markets has helped us diversify and offset some of the lost work with new orders. However, times are still tough and the situation regarding finance and funding is not easy.

“Like many manufacturers we have tried to access the Enterprise Finance Guarantee scheme, but have just given up due to the vast number of hurdles put in your way. The next thing then is they signpost you to the only available funding and that tends to be debtor finance set at an unprecedented rate, which could well tip your business over the edge.

“The problem is the Government are using the banks to kickstart the economy and no matter how desperately they urge them to increase funding they have very little control over what they do and it’s companies like ours that feel it on the ground.”

Mike, who along with fellow director Ricky Hunt employs 14 people at R&M, cited an opportunity for expansion as the latest example of the system failing industry.

“We’ve got an existing customer who wanted to extend the amount of work placed with us considerably, which would require us to invest £100,000 in new tooling and there is no way we can secure this.

“Two years ago the money wouldn’t have been a problem and we would have had the opportunity to increase turnover, safeguard and even create new jobs.”

Public Sector support

The £4.5m Automotive Response Programme, which is funded by Advantage West Midlands and ERDF, is one of the public sector initiatives making a real difference to suppliers in the region.

Delivered through MAS-WM and in partnership with Accelerate, the initiative is providing grants of up to £50,000 to help companies strategically look at business consolidation, refinancing, new product introduction and supply chain improvement.

Simon concluded: “ARP has been a tremendous success in delivering the right support direct to our automotive manufacturing companies. Over £3.9 million has already been committed and there are more than 20 applications currently being processed every week – in total, this funding will help more than 150 companies and safeguard 1000 jobs locally.

“Manufacturing as a whole accounts for 18,000 firms and generates £50bn to the regional economy, which is why we have increased our number of advisers on the ground. We are doing our bit to make them more efficient and lean, maximising the use of existing cash in business, but we need the banks to work with us in driving growth over the next decade.”