UK businesses to prioritise investment in new equipment and staff training
Businesses in the UK are set to invest in growth over the next three months indicating good news for the economy in the short-term, according to a study by funding provider, Bibby Financial Services.
The survey of 1,000 businesses with up to 250 employees reveals that 57% expect to invest over the next three months with new equipment (28%) such as IT and machinery; staff training (21%) and recruitment (19%) forming the top three areas for this investment.
David Postings, chief executive of Bibby Financial Services says that the results are encouraging but cautioned that businesses need to be careful about financing this investment. He said: “It’s positive that so many businesses plan to invest, but we need to be realistic about the number that have cash reserves or sources of finance to enable them to do so.”
One in 10 businesses (8%) say they will invest in new premises and 16% plan to spend on new product development. When asked how they would fund investment, answers varied with 38% citing cash deposits or profits; 9% planning to invest funds from friends and family and 15% saying they will use external finance.
David said: “Many businesses still face significant cashflow issues, such as late payment and customer insolvency, so it’s important that investment does not use up all available cash. Businesses using external finance are likely to be better placed to fund investment without compromising their working capital positions, which is critical for sustainable growth.”
The study – which focused on businesses turning over up to £25m per annum – also found that 70% believe they will achieve growth in the next three months, with one in five expecting significant growth. The East Midlands, London and Scotland were the most positive regions in the study.
David said: “There’s a lot of optimism in the UK at the moment and if businesses continue with their investment plans over the next three months, we may see a further reduction in unemployment in the second half of the year.”
David, however, warned that recent economic growth has been led by the housing market and consumer spending, suggesting that longer-term confidence could be stifled by the Mortgage Market Review introduced by the Financial Conduct Authority last month.
He continued: “At the minute the sun is shining on the economy, but much of the growth we have seen has been driven by the housing market. When the effects of the new mortgage lending requirements take hold, growth is likely to slow.
“Add to this next year’s election – and the strong likelihood of tax rises whichever part is elected – and we would expect the rate of economic growth to reduce somewhat.
“To achieve sustainable growth, we need to continue to support UK business through the availability of funding and a genuine appetite to lend.”.
