Lack of finance means auto suppliers miss expansion chance

22 June 2012

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22 June 2012 | David McAlonan & Kamalpreet Badasha

A lack of finance for suppliers means the British automotive industry could miss a “window of opportunity” to expand.

The survey, which was commissioned by the Society of Motor Manufacturers and Traders (SMMT) and undertaken by think-tank the Smith Institute, found for every two automotive suppliers that reported an improvement in their financing ability over the last 12 months, three vendors reported a deterioration, and seven experienced no change. Obtaining finance for machine tool investments appeared to be the most acute problem in the supply chain.

Although almost 60 per cent of survey respondents said they planned to grow their businesses to take advantage of increased car manufacturing in the UK, the study identified various financial barriers such as:

       Lenders generally have a poor understanding of automotive  suppliers, especially small ones.

      Credit conditions and terms of borrowing have worsened for more than a quarter of suppliers; and

       The relatively narrow range of preferences among smaller suppliers for obtaining finance.


“Vital opportunities for companies to grow and develop their businesses are being hampered because banks have not responded quickly enough to the need for local knowledge and sector expertise,” said SMMT chief executive Paul Everett in a statement. “There is a unique opportunity to rebuild manufacturing capability and capacity in the UK, but it requires industry, finance and government to shift gear and ensure growth businesses get the financial support they need.”

Among the study’s recommendations were: much greater engagement of the finance sector with the automotive industry; a consolidation of the government’s differing finance schemes; and for some owner-managers in the supply chain actively to identify the range of available funding options.

For the study, the Smith Institute surveyed 82 automotive suppliers of varying sizes and interviewed some financial experts, including three of the largest business banks in the UK.

* Engineers in the automotive supply chain and hi-tech industries benefit from an education scheme first developed by Jaguar Land Rover (JLR) which is expanding to cover more than 2,000 companies over the next two years.

The Advanced Skills Accreditation Scheme (ASAS) will allow engineers in England to choose from more than 50 modules for a qualification which can count towards a masters-level degree. The education programme was initially developed by JLR and English universities including York, Coventry and Loughborough to boost the skills of engineers. It is hoped that the ASAS scheme will eventually be extended nationwide.


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