Alternative Investment Supporting the UK’s Manufacturing Industry

The manufacturing industry has faced numerous challenges over the last couple of years. With the coronavirus pandemic and Brexit to name a few, Frontier Development Capital (FDC) explores how alternative debt funding can support the recovery of the industry.

Ongoing Challenges

For over 3 years the UK has tried to persevere through what has been an increasingly turbulent time for many UK industries, none more so than firms operating within manufacturing supply chains. Waves of uncertainty that started with the decision for the UK to leave the EU, alongside the unprecedented challenges of 2020, many firms are coming face-to-face with new and complex pressures that need to be relieved if a business is to thrive and grow.

With political and economic changes falling on top of the inherent issues within the manufacturing sector, such as an aging workforce, skills shortages, and production backlogs – the issues UK manufacturers face today have not been seen like this since the 70s.

According to the latest S&P Global Manufacturing Survey, 85% of British manufacturers have declared an increase in purchase prices, as well as increased energy costs as much as 80% higher than some other European countries. This, on top of increased redundancies due to the pandemic and manufacturers now struggling to recruit skilled workers as production activities recover, it is imperative that SME decision makers consider their future business growth plans and look to invest.

Investing in supply chains

The medium-term outlook for UK manufacturers will be challenging, however considering and sourcing appropriate investment partners can alleviate some of the pressures.

There is a vast array of funding options for SME manufacturers in the UK, with asset-based lenders (ABLs), alternative fund managers and traditional banks all providing different packages with varying costs and risk tolerances. Taking the time to meet with fund managers, corporate finance advisors or accountancy firms specialising in sourcing capital for manufacturing businesses can be the first step to understanding what options are available in these demanding times and learn how an investor can offer “more than money”.

Partnering with SME lenders like FDC, many have extensive and established networks of talented and trusted professionals including Finance Directors, Managing Directors and sector specialists who can share knowledge and add real value to business plans.

FDC manages many investment funds able to support SMEs operating within the manufacturing supply chain, such as the National Tooling Loan Fund and the recycled Advanced Manufacturing Supply Chain Initiative (AMSCI). FDC approves investment for manufacturing businesses to support long-term growth, component production and supply chain competitiveness.

The National Tooling Loan Fund is specialist funding available up to £2m for component manufacturers and toolmakers operating in England. It helps bridge the payment gap when new tooling is required for a confirmed order from an OEM.

And the recently launched recycled AMSCI Fund is open for new enquiries, supporting SMEs, innovators and suppliers within the advanced manufacturing supply chain who need investment to address market failures and support job creation.

Businesses within the manufacturing industry play an important role in our economy and funding providers such as FDC can give them the financial assistance needed to push passed the difficulties created from the last few difficult years to help the industry grow and succeed once again.

Diane Watt, AMSCI Investment Director at FDC comments: “Sourcing the right investment partner can be a challenging process especially for manufacturers working in turbulent times. However the right investment can be the catalyst that enables growth, expansion and security.

We understand the challenges manufacturing SMEs and suppliers face bringing innovation and R&D through to fruition. And with the recycled AMSCI we can provide flexible funding to support advanced manufacturing projects that would not otherwise continue.

Investment is available from £0.5million and aims to support ambitious businesses to achieve their full growth potential as well as supporting job security. Funding can be used for R&D, Capital Expenditure, and other project related costs.”

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