UK manufacturers’ lending to customers rises to record levels

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Britain’s largest manufacturers are increasingly stepping in to fill the gap left by banks, with lending to customers rising to a post-credit crisis high of £16bn in 2013.

Credit provided by the UK’s top 35 listed manufacturers has risen almost 50 per cent over the past five years, as companies look to secure sales to customers struggling to get bank funding.

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Over the past year alone, the amount of credit provided rose £200m, according to research by LPM Outsourcing, a service provider for the asset finance market.

The decline in bank lending has led many manufacturers to look at new ways to help their customers fund new equipment purchases. Some have set up their own banking arm to provide finance to customers buying their parent company’s products. Others have increased their lending to customers by making greater use of extended payment terms.

In August, Dell, the computer maker, set up a financial services arm in Europe to offer sales finance after realising that bank lending remained scarce for many of its SME customers.

JCB, the world’s third-largest maker by volume of construction equipment, has also had demand for credit through its financing arm rise in recent years. Its lending has risen from £475m in 2009 to £651m in 2013.

“Some of this growth can be attributed to the difficulties that SMEs have in getting loan finance from mainstream banks since the financial crisis,” said Paul Jennings of JCB Finance.

The credit crunch meant manufacturers’ customers found it difficult to get funds from their banks to buy new or replacement equipment, said Ian Dennis, business development manager at LPM Outsourcing. “Many larger manufacturers stepped in to fill that lending gap and ensure that sales did not grind to a halt,” he said.