Funding problems in auto supply-chain

The growth of automotive supply-chain companies is being constrained by restricted access to finance, according to a report from the Smith Institute that was commissioned by the Society of Motor Manufacturers & Traders. The report says it is vital for the recovery of the UK’s economy that the sector receives the funding it needs to capitalise on the global opportunities now emerging.

SMMT chief executive Paul Everitt said: “With over £5.6 billion pledged to the UK during the last 18 months, there is ‘a window of opportunity’ to strengthen the UK supply chain, creating jobs and prosperity for the long-term. A lack of expertise within the finance sector is holding back growth in the automotive industry. Vital opportunities for companies to grow are being hampered, because banks have not responded quickly enough to the need for local knowledge and sector expertise. There is a unique opportunity to re-build manufacturing capability and capacity in the UK, but it requires industry, finance and the Government to shift gear and ensure that growth businesses get the financial support they need.”

The report represents the views of more than 80 automotive firms operating at every level of the supply chain, as well a range of financial and lending institutions. It identifies various barriers to growth: a lack of understanding of the automotive sector within the banks, particularly at a local level; funding gaps due to how banks evaluate the total assets owned by a company; problems securing finance for tooling development costs; and the reluctance of SMEs to seek external equity over internal cash flow and loan financing.