Manufacturers are failing to receive financial support from UK banks, according to the latest survey by the manufacturers’ organisation, EEF.
The group’s second annual ‘Innovation Monitor, Creating the Playing Field’ revealed a lack of understanding from financial institutions about why manufacturers invest in innovations. According to EEF, this has left many of the better-performing companies with difficulties in accessing credit despite their intentions to increase investment in innovation.
Of the 218 manufacturers surveyed, 53.2 per cent said that they had introduced product innovations over the past three years and 59 per cent said they would continue to invest over the next three years.
The survey showed that the biggest challenges manufacturers faced when innovating were speed (21.3 per cent) and technical barriers (22 per cent). However, collaboration with customers and the research base had increased during the recession with 94.4 per cent of respondents collaborating with customers, up from 84.6 per cent in 2008.
However, the survey also revealed that two fifths of manufacturers had found it more difficult to access bank finance in the last 12 months, while none had found it easier. In addition, those companies that fell under the ‘successful innovators’ category were 40 per cent less likely to have difficulty accessing credit than those that struggled to generate a return from their investments.
EEF director of policy, Steve Radley, said: ‘Although cash was the first casualty of the recession, most manufacturers actually increased their investment in innovation during the downturn. Over the past 12 months, manufacturers have focused on improving their operations by investing in process, marketing and organisational changes. They have also worked more closely with their customers, suppliers and universities to make the most of scarce funds.
‘Looking forward, these internal improvements have set up an increased focus on developing innovative products and services, leaving manufacturers well placed to capitalise on the expected recovery in global markets.’
EEF has urged the government to launch a single financial vehicle to bring together various initiatives, such as the new regional venture capital funding, the Enterprise Capital Funds, the Innovation Investment Fund, the Grant for Research and Development and the regionally delivered proof of concept funding.
The organisation suggests that the vehicle should be presented under the auspices of a new ‘Bank for Industry’, which uses experienced investors and industry professionals to provide a network of non-executive directors with expertise in supporting innovative businesses.
Radley added: ‘It is worrying that the more innovative companies in our survey had more problems in accessing finance from banks, because it flags up ongoing, long-term problems in accessing finance. Although the government’s National Investment Corporation could be useful for a handful of growing companies, government needs to go further and meet the long-term finance needs of a wider range of innovative companies.
‘Manufacturers also need to adopt a more strategic approach to innovation, for example, by collaborating more closely with suppliers to ensure that they share the same strategic vision. This will bring benefits up and down the supply chain and ensure that companies are geared up to deliver customer-focused innovation. Better management and monitoring of their activities, by developing innovation-specific metrics, would help companies build on their strengths as well as identify and address their weaknesses.’