Banks failing to support innovation say manufacturers

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The UK's financial sector is failing to support manufacturing companies because it fails to understand how and why manufacturers invest in innovation. This leaves better performing companies still struggling to access the bank finance they need, says a survey published today (5 October) by the manufacturers' organisation EEF.

The report, 'Creating the Playing Field', shows that manufacturers have continued to increase their investment in innovation despite the recession. However, two fifths of companies had found it more difficult to access bank finance in the last 12 months and none had found it easier. Successful innovators were 40% more likely to have difficulty accessing bank finance than companies that struggled to generate a return from their investments in innovation. EEF's report recommends that the various government mechanisms for supporting innovation be concentrated into a single financial vehicle with the express intention of supporting innovation. This vehicle could be under the auspices of a new Bank for Industry which the EEF has proposed. EEF director of policy Steve Radley (pictured) said: "Although cash was the first casualty of the recession, most manufacturers actually increased their investment in innovation during the downturn. Over the past 12 months, manufacturers have focused on improving their operations by investing in process, marketing and organisational changes. They have also worked more closely with their customers, suppliers and universities to make the most of scarce funds. "Looking forward, these internal improvements have set up an increased focus on developing innovative products and services, leaving manufacturers well placed to capitalise on the expected recovery in global markets." "It is worrying that the more innovative companies in our survey had more problems in accessing finance from banks, because it flags up ongoing, long-term problems in accessing finance. Although the government's National Investment Corporation could be useful for a handful of growing companies, government needs to go further and meet the long-term finance needs of a wider range of innovative companies. "Manufacturers also need to adopt a more strategic approach to innovation, for example, by collaborating more closely with suppliers to ensure that they share the same strategic vision. This will bring benefits up and down the supply chain and ensure that companies are geared up to deliver customer-focused innovation. Better management and monitoring of their activities, by developing innovation-specific metrics, would help companies build on their strengths as well as identify and address their weaknesses."