According to a new report by the Smith Institute and commissioned by the Society of Motor Manufacturers and Traders, the growth and expansion of automotive supply chains is being restricted by limited access to finance.
“A lack of expertise within the finance sector is holding back growth in the UK automotive industry… a unique opportunity to re-build manufacturing capability in the UK is here, but it requires industry, finance and government to shift gear and ensure businesses get the financial support they need” said Paul Everitt, SMMT Chief Executive.
The new report identified five barriers to growth, with most blame going to the banks and financial sector. The barriers included a lack of understanding of the automotive sector from banks particularly on a local scale; reluctance of smaller sized businesses to seek external loan financing; favourable payment terms offered by vehicle manufacturers to supply companies are often not returned further along the chain; difficulty of securing finance for development costs due to focus on the outstanding value of a machine tool over its long term asset value it produces and finally there are funding gaps made by banks in how they evaluate companies total assets.
The report has suggested banks act quickly to develop local knowledge of the automotive industry to help financial growth. Banks and the vehicle manufacturers should work together to develop a better understanding of the growth opportunities for the automotive industry.
Finally it said the government needs to create a more enduring framework of support and investment for businesses seeking to grow, and that a ‘Tooling for Growth Taskforce’ should be created to provide a shared platform for banks and vehicle manufacturers so as to explore more original solutions to access more financing.