HIRE EQUIPMENT & FINANCE PMENT & FINANCE E
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By Neli Ivanova, sales manager, industrial equipment at Siemens Financial Services nalysis of the global machine tools market is
positive; it is expected to grow by over $40bn (a compound annual growth rate (CAGR) of seven per cent) from 2017 to 2022.
But while this is the case globally, machine tools users in the UK face political and economic uncertainty that their international counterparts do not. According to Atradius, the UK machine building industry may expect decreasing profit margins during 2019 as Brexit uncertainty continues to impact b t business in anticipated that may
y expect dec easing profit 9 as Bre
Brexit uncertainty ent
nty hat UK m chine b mach
m y be im lowe t
lo er cap to co oftenoft n
o ten The The from f om in nv c ontinu mp
pital inves m ue to
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invest the UK
e
ere is a lso plenty m the indus try tha ’s relationship
lso p len ty ple nty dustry tha
tlook. ls o p
lso pl enty s r nvestme t
Technologies Associ i ation CEO James id “
ment ogi
said: “The manuf y internation ng is a
is highly int Brexi
and pd pro p companies
Man a od o
M nufa moo
mood of UK manufac
Th oo
30 NOVEOVEMBER
mpanies articu ar ma manage thenage t heage th ei ir c ash eir ca sh p come in. ” his
mpanies n part ula may find anage the
d prosp n a N ospecd p ros pects. In a N mpanies
exit is causin d pr
es in i in p upp or uppor e cas h p o tion ppo r ed por ted eir cash p ositio n as u olog
caus g is a ona
affe cting p ans
affec ing plans No De
oft n expens ve s ive s ctosecto The
or’s out
sive, ac ess to fun c ce ss to f u nd ng t look
to in ve s t in m siv e
ust ry t ha stry th at u nce rtain hip with the
y of a ne cd h at un cer ta p w h th
t. In a stat emen t M n
a t u nc erta n ip wit h the U nt Man
y of an ecd at uncerta
y o f anecd d ot in machi onomic gro mic g
u e to inv e st in mach e tools, which are sive a cc e tloo k tlo ok
For m hine t
e, ac ess to fu ding is key to the es s t o fundi ng is nec dotal evi d e t, Man uf en ence enc ainty relati ng to at n g t o ng to
p w ith t he E U is u ppressing EU is s i p with the EU s sup pre ssi ng ent
nufactur in in
ppr ess ing ng
nufactu ng techno ogies sect r alised
ati n CEO Jam es S elk uring te h ologi ed Th unc
d it dif
2 019 wh ic h g augch ga uges th cturers. T he s The re po t no
h n
ep ort ote not cto
No D al scenario s mall a
This view is supp rt d rte d by the An acturing Repo rt 2
rted b A nnual t 2
An Ann al V MBER 2019 | FA FACTORY&HANDL NGSO UTIONSDLINGSO UTIONS
ORY&HANDL r
h gaug the rep rt n tes
report notes LINGS DLINGSO UTIOUTION LINGINGSOLUTIONSTIONS ctor
certainty th s, investme ario
o smaller nd it difficult to on as unexpected cost ed co sts osts ts tor or
d. The un certainty that tme
ment ent
pp res sing rin g k
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ls, which are e
, which are he
ecreasing profit ncertainty
s investment. It is buil
usin i
pita l in vest ments. manufacturers ue t inve
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ilding businesses stm
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sses
mpa ed by s ower economic growth and pi ital l inv stm
mpacted b slower economic growth and p tal inve tm ue to inve
growth and facturers
nd
that manufacturers say their strategic planning is being put at risk, and a significant majority believes manufacturing will be plunged into chaos by Brexit. Adopting digital technologies takes investment, but manufacturers are reluctant to invest while unsure if/when Brexit will happen, and what the UK’s future relationship with the EU will be. In the 2018 issue of the report, 54 per cent of respondents said Brexit will cause chaos for UK manufacturing, and the 2019 report sees this increase to 64 per cent, further evidence of growing uncertainty. di
row
The findings from these industry sources suggest that machine tools users may be delaying their investment until they have a clearer picture of hat the future w
inv nv
investment until they have a clearer picture of what the future will hold. While future trade re
vestment
restrictions, rules and tariffs are unclear, and ela onships with the EU ar
estr ct ons, rules and tariffs are unclear, and relationships with suppliers and customers in the EU are uncertain, it makes sense that anufacturers may wish to preserve their cash reserves and credit lines rather than commit to any high value investments in equipment or technology. Manufacturers might therefore choose to ‘sweat’ their assets and refrain from replacing eir ma chi
hat the ure w estriction ru lations
he futu will hold. Wh
achine too e fut
will hold W and tariffs
wi h suppliers h upp eserves a eserv and cred
ers may wish to and credit lines ra
a nd cr edit lin es ctu re rs
a nd tariffs are rs a nd c s an d c
s and c n it mak es t m ake s may wish o prese ay w sh t o p e
to any ho a ny h h value inve tech
technolog M a
to s weat th wea their assets and refrain from replacing at’ eir assets and refrain from replacing their m ch ine tools.eir mac ne tools. mac n e t ools H wever, fiHoweveHow ve
chnollo y Manufact ure s m ight th o ‘swe at sw ea heir m ac
high val ue i nv Ma
c hine tools. chine tools. equ equipment w ets and ref
hich can enable machine tools users to invest in new equipment with confidence. Pay-to-use an
wever, fina nci fin anc fi nan cing arrangements now exist which can enable machine tools users to invest in new eq n
However, financing arrangements now exist hic
financin g g n
ar eq
nd p -for -o re effective quipme
nd pay-
q pment and tec hn pgrades. S uch
pment and techn rades Su ch fi an h fi nancing techniques spread Such financing techniques spread
e, altern ive m chn olog y ncing t
ch financing techniques spread
nology n cin g t nc ing nci ng t
agreements a e m
m ethods of funding
any hi g h v alu e i vestme s i n e qu chn gollogy. M anuf acturers m igh the ght th sse
an y h h hig h va lue in
an d c redi it li nes dit l line s r ather t ha ent s n eq nts in eq ui ers m i ig ht th fr
ma y wi h to pr eserv r th a
nvest ments rath
y w ish to pre o pres erve er tha
s in equ ght t
ir assets and refrain from replacing
r assets and refrain from replacing to ols . tool ls
assets and refrain from replacing set s a nd f d r efrain fro
and pay-for-outcomes agreements are effective are effective, alternative methods of funding equipment and technology investments and upgrades. Such financing techniques spread
r- outcomes agreements are effective ve rnative methods of funding ech nol ogy n olo gy investmen g techniques
nable machine tools users to invest t with confidence. Pay-to-use comes agreements are effective ve m
y have a clearer picture of While future e
e unc
in the EU are uncertain, it makes sense that i in , it m ak manu ese
the EU are unce ain, it makes sense thatt makes manufacturers may wish to preserve their cash resere
rs and cust kes sen
tha n commit
at mach tools users may be dela t until they h w
t ma dings from these industry sources suggest
the cost of machinery over an agreed financing period, whereby the customer’s monthly finance repayments can be aligned with expected benefits gained over time from new/retrofitted equipment, such as improved productivity, operating cost savings, energy efficiency and access to new markets. This removes the need for a large initial outlay, and leaves existing funds available for other expenditures. In other words, asset finance enables manufacturers access to the latest technologies, without having to commit scarce capital or use traditional lines of credit.
Financing arrangements can also cover other costs such as installation, as well as providing the flexibility to upgrade technology in line with technology developments.
In the current political and economic climate, paying for the benefits of a new machine, rather than the machine itself, can provide manufacturers with the means and the confidence to continue to upgrade their equipment and technology. These arrangements may be particularly attractive to SMEs as, if big tariff rates are imposed on imports and exports, manufacturers may end up doing more business in the UK rather than abroad. In this instance, they may need to scale up their UK production in order to manufacture more parts here. Finance could help manufacturers make that investment sustainably.
Siemens Financial Services
https://new.siemens.com/uk/ en/products/financing
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