With an export value of £1.8bn, UK wood products are a key driver of our economy. However, since 2008, the complex supply chain and close links with the construction industry have made the UK timber industry particularly susceptible to the effects of the recession.
Results from our Close Brothers Business Barometer show there is a perception among business owners that finance is not available. Our research shows that as many as a third of UK construction and related industry firms haven’t approached their bank for additional funding because of fears they will be refused.
This may be why many timber firms have continued to focus their efforts on day-to-day operations and put growth aspirations on hold.
However, it seems the economy may be picking up pace, with construction firms now reporting output levels at a three-year high. This boost is filtering through the supply chain and has the potential to have a positive impact on the UK timber market.
Increase in demand for social housing and reports of a national brick shortage have also contributed to an increase in the order books of UK timber frame manufacturers.
Planning ahead
With recovery potentially on the horizon, it’s a good time for business owners to take stock and plan ahead but for many, obtaining funding remains a challenge and it can be difficult to know where to turn as knowledge of alternative sources of finance remains quite low. The Regional Growth Fund (RGF) may provide part of the solution.
The fund is a £3.2bn government resource for SMEs that is granted via intermediaries. It asks businesses to invest in growth, in order to safeguard existing jobs and create new ones.
Launched in 2011, the RGF has already awarded over £2bn to almost 300 projects and programmes which have helped create more than 500,000 jobs and over £13bn of private sector investment.
At Close Brothers Asset Finance, we have been awarded £15m from the Fund to help UK SMEs via the Close Brothers Asset Purchase Scheme. If you need financial support for a project that involves private sector investment and will create sustainable employment, but need help to invest in additional equipment or machinery, you may be eligible for an RGF grant.
The size of the grant available is based on the scale and location of your business, the level of asset investment and number of sustainable full-time posts being created or retained.
It’s important to note that you must commit to creating or retaining those jobs to be eligible. One job must be created or retained for every £15,000 received, up to a maximum of £500,000.
There are several stages to the application process and each needs to meet the RGF’s objectives. Close Brothers Asset Finance will be on hand to support you from your initial expression of interest to the moment you receive the money, and beyond. We have already guided over 130 SMEs through the process and have seen first-hand the positive impact it can have on the business as well as the local economy.
RGF in action Although not in the timber industry mainstream, the example of Worksop-based Nottinghamshire Recycling Ltd gives a useful illustration of how the RGF is used and can benefit a business.
The company undertakes a variety of waste and recycling services that help customers to decrease their carbon footprint and reduce the environmental impacts of landfill. This includes wood recycling.
In March 2013, it secured a five-year contract with FCC Environment, a European waste management company. But to fulfil this contract, group managing director Kevin Burgess knew that the company would need to invest heavily in new assets and, subsequently, additional members of staff to operate the additional equipment.
Nottinghamshire Recycling identified that six pieces of equipment would be needed, but didn’t have a sufficient deposit to complete a finance deal.
Having worked with Close Brothers Asset Finance for several years, Mr Burgess got in touch to discuss potential solutions. Our area sales manager Martin Howliston suggested a hire purchase deal using £174,500, drawn from the Regional Growth Fund. Thanks to the final funding package, Nottinghamshire Recycling was able to create 10 jobs, increasing the total workforce to 50.
"We wouldn’t have been able to secure the contract with FCC without the financial support from Close Brothers and they took the time to understand our requirements and circumstances before tailoring a solution to fit. It was competitively priced, and the paperwork was completed quickly, which was paramount with this deal," said Mr Burgess. "We are delighted to have been able to create 10 jobs for local people, and the deal has acted as the catalyst for wider business expansion. This is a long-term project, but we’re already seeing results."
