• • • DEFENCE TECHNOLOGY • • •
GROWING PAINS?
HOW MANUFACTURERS CAN PREPARE FOR DEMAND SURGE
Despite this, these businesses have faced an BY JOHN HARRISON,
HEAD OF RELATIONSHIP MANAGEMENT, ALLICA BANK
B
ritish manufacturing businesses have faced no shortage of challenges over recent years.
With volatile energy costs, the longer-term
effects of tariffs, and just this summer, uncertainty over the defence review that dominated headlines. With funding now allocated however, many businesses in the manufacturing and engineering supply chain will be anticipating growing order books. Electrical engineering businesses will play a vital
role in that growth, providing the automation, software, testing and systems integration needed to keep manufacturing on the road. Amongst the firms I speak to, there’s a sense of excitement around potential growth after a tricky first half of the year, dogged by macroeconomic uncertainty and energy price inflation. The question now is, are these businesses ready to meet demand?
The established business effect For many manufacturers - especially established manufacturers with between 5 and 250 employees - underinvestment has been a long-term challenge which will need to be overcome if electrical engineering output is to increase. While only 36 per cent of British manufacturers across the UK fall into the established business category, these firms support nearly half of all of Britain’s manufacturing jobs and are vital when it comes to maintaining the sector’s innovation and skills requirements.
uphill battle in recent years, and compounding economic issues is the fact that high street banks have pulled away from lending to this segment. Research by Allica Bank revealed that business
lending in the UK has collapsed over the last thirty years. In fact, lending to established businesses has declined by £65 billion, leaving the UK with the lowest rates of business investment in the G7. This is especially important when it comes to established manufacturing businesses, as they make up a significant portion of the sector but face the largest hurdles when it comes to securing finance. So in theory, the government’s announcement
of an extra £15 billion in defence spending is welcome news but coming off the back of years of minimal lending opportunities, can these established manufacturing businesses now access the finance needed to capitalise and deliver on this opportunity for growth?
Preparation meets opportunity Success will depend not only on accessing finance, but on how businesses go about securing it. Given the UK’s business lending gap, it’s no surprise that many of the manufacturers and engineers I speak to are cautious about investing. However, the majority of those are also excited about what’s coming next and are facing the challenge to secure finance head-on. In my experience, this is the correct approach.
Often, the businesses that thrive during periods of increased demand are those who have readied themselves before opportunity strikes and prioritised investing in skills, operational efficiency and advanced engineering capabilities. Now what matters is choosing the right lender.
As many as 75 per cent of business owners only go to one lender when applying for finance, meaning they often miss out on those who are
30 ELECTRICAL ENGINEERING • JULY/AUGUST 2026
more willing and able to back their ambitions. In fact, challenger banks now account for around 60 per cent of business lending, and my team at Allica are confident in our level of understanding of the pressures facing established manufacturing and engineering SMEs. Exploring your options can often be the
difference between securing funding and a ‘computer says no’ outcome. Shopping around is no longer a nice-to-have; it’s a necessity for growth.
Planning ahead Planning for growth before the funding arrives is also key. When I speak with established manufacturing businesses, this is really what I want to get across. Fuller order books bring an increased need for working capital and alongside it, an increase in operational efficiency. This is also where my team’s expertise comes
into play. Whether it is finding ways to release capital from existing assets to fund investment or helping businesses access UK Export Finance- backed support as they expand overseas, understanding the challenges manufacturers face day-to-day means we can provide advice that’s grounded in the realities of the sector. The defence spending boost is a golden
opportunity for electrical engineering supply chain businesses, and those that invest now in innovation and productivity will be in the strongest position to meet the rising demand. Accessing the finance to make those
investments has historically been difficult to come by, but today’s funding landscape offers established businesses far more options if they know where to look.
www.allica.bank
electricalengineeringmagazine.co.uk
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