Manufacturers draw on reserves

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South west manufacturers have indicated they will use their own cash reserves rather than a bank loan in order to finance investment in new technology over the next six months.

Charles Hill

That’s according to results from the Manufacturing Advisory Service’s (MAS) latest Barometer.

Nearly half (49%) of the MAS Barometer respondents who said they plan to invest in new technology over the next six months, indicated they would finance such investment through their own means. In comparison, just 21% said they would apply for a bank loan to fund the investment.

These statistics suggest that although the financial withdrawal of some banks has made seeking funding a challenge, the economic outlook is becoming slightly more buoyant.

This is further reflected by the latest figures published in CBI’s Industrial Trends Survey, which show a steady increase to manufacturers’ order books so far in 2012.

Commenting on the findings, MAS operation manager Charles Hill commented: “Investing in new technology is crucial for many manufacturers if they are to meet rising demand, grow and become more competitive.

“With inflation relatively high and bank interest rates fairly low, companies that took a cautious approach over the last few years have built up quite healthy cash reserves and are in a strong position to invest in assets that will deliver long-term profits.”

Nigel Jump, executive director and chief economist at Strategic Economics Ltd, added: “With the banks still adjusting their loan books, it may well be those companies that can self-finance that will lead any investment growth in 2012. It is vital that south west manufacturers continue to remain competitive as the world economy slowly recovers.”