Fast forward to now, compounding export challenges, skills gaps, and evolving regulatory demands comprise daily challenges for those in the industry.
Challenges and opportunities faced by SMEs in the manufacturing sector are now even more pressing, with new factors impacting growth and stability.
Grenke’s recent New Lease of Life report, looking at the state of play for leasing for UK SMEs, found that 57% of manufacturing firms cited access to finance as a key business challenge. At the same time, 74% believed that new assets and equipment would help re-energise their business and support future growth. Right now, just 43% of manufacturers currently lease some equipment, so the question is, are we being smart enough about our options? Could leasing be the step towards driving growth, improving innovation and productivity, and ensuring businesses are investing in their futures?
The SME Manufacturing Picture: Navigating Uncertainty and Market Shifts
Navigating uncertainty and shifting market conditions is a constant for SMEs today. When we dug into the specific business challenges holding manufacturing companies back from growth, our report found:
- 87% of manufacturers cited energy costs against a national average of 73%
- 77% said supply chain issues, compared to the national average of 54%
- 75% said less/ unpredictable customer demand. The national average is 70%
- 72% of manufacturing businesses said commercial rent/ rate increases compared to a 62% national average
- 66% of manufacturers cited the need to replace assets and equipment compared to a national average of 57%
This picture shows that as a sector, manufacturing is feeling the pinch from all sides.
Investment Gaps and Growth Challenges: What’s Holding SMEs Back
The New Lease of Life report also sought to identify the areas where businesses feel they have suffered or stagnated over the last 12 months, due to a lack of investment. Drilling into the manufacturing responses, we found:
- 40% said expanding into new markets
- 32% of manufacturing businesses cited hiring staff
- 28% said investing in essential equipment
Despite this, 57% of manufacturing firms were optimistic about growth opportunities compared to a national average of 51%. How do we get closer to delivering on this optimism?
The Big Efficiency Barrier: Suboptimal Equipment in Manufacturing
Our research identified a roadblock to growth that stopped us in our tracks: 54% of manufacturers currently operate with suboptimal equipment. Breaking this figure down further, this consists of 15% that doesn’t work or is no longer used, and 38% which is adequate but not optimal and could do with upgrading.
This means that over half of the UK’s manufacturers are currently using sub-par equipment, looking to achieve their growth ambitions with equipment that simply isn’t fit for purpose and can’t support their people, products, or productivity. And while we’ve seen that key operational strategies (market expansion and hiring) have been constricted by a lack of finance, we need to consider the impact that operating with sub-optimal equipment has on an organisation, and what the true opportunity cost is here.
Leasing as a Path to Business Growth: Unlocking Potential
If leasing offers the opportunity to upgrade to newer equipment as technology advances, ensuring your business can meet evolving customer needs – especially in sectors like manufacturing where equipment can rapidly become outdated – why resist the opportunity to be equipped for growth? Is there a better way to think about growing value in your business, especially when it comes to soft assets, which, by their very nature, depreciate with growing speed?
Unlocking the Potential of Leasing: A Strategic Approach for Manufacturers
At Grenke, we believe leasing is no longer just a financial tool—it’s a strategic enabler for manufacturers. I already mentioned that 43% of UK manufacturers currently lease some equipment; I expect this figure to grow as we see an uptick in the size and scale of companies leasing equipment. Interestingly, we’re seeing global manufacturers – who are cash-rich and unquestionably have the resources to buy outright – now opting to pay for equipment out of their OpEx budgets rather than their CapEx ones.
Strategic Benefits of Leasing: A Path to Sustainability and Growth
What are the strategic benefits to leasing finance?
- Alignment with strategic goals: Leasing frees up the opportunity to support long-term objectives such as sustainability, NPD, and competitive differentiation, all while preserving cash flow.
- Cost management: Leasing provides predictable payment structures that fit within controlled budgets, offering a pathway to cutting-edge, market-leading equipment without large upfront cost.
- Tailored flexibility: Whether it’s upgrading your production line or investing in energy-efficient technologies, leasing allows institutions to align asset investments with evolving priorities.
- Maintaining managed solutions: Your experience and our figures know all too well the cost of equipment maintenance. Built into leasing contracts transparently, this means you receive a fully maintained managed solution with no capital outlay. We know technology means shelf-lives are getting shorter by the second, with equipment constantly requiring replacement, removal, and disposal. Opting for five-year fully maintained solutions will also include upgrades at the end of the term.
- Sustainability: With the transition to sustainable manufacturing with eco-friendly industrial machinery and cutting-edge green production equipment so high on the agenda, leasing can support your organisation’s progress towards carbon-neutral operations.
Debunking the Myths Around Leasing: Overcoming Skepticism
Our research showed us manufacturing as a sector is more open to the potential opportunities that leasing offers. But on a personal level, 90% of manufacturers say they are excited or interested in leasing/asset finance in terms of the potential growth opportunities it presents their business (30% excited, 60% interested), 8% are sceptical and 2% unfamiliar. The average SME figure was 23% excited, 61% interested, 13% sceptical, and 3% unfamiliar.
There’s room to improve understanding though. Asked what the factors stopping them from leasing more of their equipment, 32% cited concerns around maintenance and servicing, 32% said understanding the overall cost impact, and 25% said lack of leasing knowledge and experience.
Addressing the Cost of Not Investing: Seizing Leasing Opportunities for Growth
I hope this article has addressed these. At Grenke, we’re proud to offer tailored leasing solutions, from simplifying finance and removing the complexities of traditional funding, to offering streamlined leasing processes that let you focus on running your business, through to comprehensive asset support that meets the diverse needs of UK manufacturers.
For Grenke, the question always comes back to: what is the cost of not investing? Can your business truly afford to not make the most of the competitive advantage that leasing offers, to slip behind and constantly be playing catch-up in your market? How do we close the gap between the appetite and recognition for leasing opportunities and the reality of adoption?
At Grenke, our commitment is to empower manufacturing growth in the UK, to educate businesses on the benefits of leasing, and make leasing solutions more transparent, accessible, and adaptive to the current business environment. Making sure you can drive performance, productivity, and growth.
