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UK manufacturers `turn down orders worth £2.3bn`

26 March, 2012

A survey has found that 40% of UK manufacturers have turned down new orders – worth a total of almost £2.3bn – because they do not want to invest in new capital equipment in the current economic climate.

According to Lombard, the asset finance arm of the Royal Bank of Scotland, which conducted the survey, the low levels of investment mean that the UK now lags behind countries such as Turkey and Mexico in its use of machine tools – a key indicator of manufacturing investment. It adds that using outdated machinery is often a false economy because of increased maintenance costs and poor efficiencies.

Lombard`s research also found almost half of those firms that are investing, are using cash from their balance sheet which it describes as “one of the most inefficient ways it could be done”. Only 14% are using asset finance, where a finance provider takes the risk on the value of any new machinery falling. Asset financiers also take responsibility for the disposal and management costs associated with owning new equipment.

According to Lombard, 72% of UK businesses admit that they do not know how asset finance works.

“The economy cannot afford for businesses to turn down orders,” says Lombard’s MD, Alexander Baldock. “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.”

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