THE RESULTS. 3 Business priorities

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1 Quarter rbsif.co.uk follow THE RESULTS s from over 1,500 UK businesses 1 Managing cashflow We report on debtor days, payment terms and early payment discounts PLUS the frequency that UK businesses check their cash position 2 Exporting With 43% of businesses indicating that they export goods, we see where these businesses are based and which sectors they operate in 3 Business priorities We report on the different priorities being addressed by business owners and the indications of returning confidence to the UK economy 4 Supporting growth With 94% of respondents saying that they understand that Invoice Finance can help grow a business, we explore further how this works 5 Sector by sector We examine the research results and provide further insight by sector including Manufacturing, Recruitment, Pharmaceuticals, Legal, Engineering and Food and Drink 6 Contact details Our specialists are here to help you with any further enquiries SECURITY MAY BE REQUIRED, PRODUCT FEES MAY APPLY

2 Introduction Executive summary Welcome to the results of the Talking Business survey. The online survey was conducted during the second half of 2013 and promoted in our Talking Business supplement published in the Daily Telegraph. I would like to thank everybody who took part. We received over 1500 responses from businesses across different industries in the UK and the breadth of insight we achieved from this survey has provided some very interesting opportunities for comparison between different regions and sectors. This report examines the priorities, concerns and attitudes of UK businesses, particularly in relation to managing working capital, payment terms, exporting, planning for growth and other funding and invoicing related issues. A digital version of this report is available at along with an electronic version of the Talking Business supplement. I hope that you find the report of interest and my team and I would be pleased to answer any questions you might have please see the back page for contact details or me personally at [email protected] Thank you, Martin Morrin, Managing Director, RBS Invoice Finance This report examines the priorities, concerns and attitudes of UK businesses. Martin Morrin, Managing Director, RBS Invoice Finance Respondees by sector Sector Qty Accountancy 24 Agricultural 20 Broker 5 Construction & Plant 69 Courier & Distribution 25 Engineering 102 Financial Services 29 Food & Drink 72 Healthcare 27 IT 53 Legal 7 Manufacturing 346 Pharmaceutical 13 Printing Services 59 Private Equity 1 Recruitment 153 Retail 55 Sales 71 Transport 100 Other 335 TOTAL 1,566 Respondees by region Region Qty North of England 562 London & South East 468 Midlands & East 306 of England Scotland 131 South West & 88 South Wales Other 11 Total 1,566 The following report provides detailed insight to the results of a major UK business survey we ran last year. A total of 1,566 UK businesses participated in the online survey, providing indepth insight to share with you. Business owners from over 20 different sectors shared their thoughts on topics ranging from payment terms, exporting and cash flow management to business growth and much more. We compare and contrast results from around the UK highlighting regional similarities and nuances and provide a more in depth look into four key sectors: Manufacturing, Recruitment, Engineering and Transport. Please visit to download a digital copy of this report and also to read the original Talking Business supplement published last year. Question Key finding What are your standard payment terms with your customers? (How many days do you give them to pay?) On average how long does it take your customers to pay? Do your suppliers offer you a discount for paying invoices early? How frequently do you / your business check your cashflow position? Did you know that Invoice Finance can help you grow your business? Has your accountant / business advisor ever talked to you about invoice discounting, factoring or asset based lending? Please rank the following strategies in terms of importance over the next year: Grow Income, Grow Profits, Manage Risk, Cut Costs and Manage Day-to-Day Cashflow 68% of businesses seek payment within 44 days 34% of businesses get paid within 44 days 18% of suppliers offer early payment discounts 79% of business owners check their cash position daily 94% of businesses recognise that Invoice Finance can help businesses grow 79% of businesses have spoken to their business advisor about Invoice Finance solutions 57% of businesses consider growing profit the highest priority over next year Indicates the need of SMEs to receive prompt payment to keep their business and their supply chain functioning A large gap exists between contracted terms and real payment time - indicates an endemic culture of late payment that puts a strain on small businesses SMEs could consider their policy on early settlement discounts to get paid earlier Concern over cash position is a top priority and up-to-date information a must A strong indication that business owners understand that business growth can be supported by invoice finance A positive sign that advisers are informed about Invoice Finance solutions and how they can help SMEs and Corporates manage working capital An indicator that confidence is returning to UK businesses as the focus appears to shift from cost cutting and risk management to growing profits and income Contact us Please don t hesitate to get in touch if we can help in any way. All the contact details you need are on page Talking Business Talking Business 3

3 1 Managing cashflow Late payment depletes working capital and hinders opportunities on one side on the other it is used as a way to manage cashflow. Managing both debtor days and availability of working capital are two of the major issues affecting business leaders across Britain. Q What are your standard payment terms with your customers? (How many days do you give them to pay?) 25% 6% 1% 10% 58% Less than 30 days days days days 90 days or more Don t know Q On Terms average how long does it take your customers to actually pay you? (What are your debtor days?) % of respondents with these as standard terms % of respondents receiving payment within this time Less than 30 days Don t know 0 1 Total With 65% of respondents receiving payment after 44 days, there is no doubt cashflow is under pressure. Invoice Finance is a flexible alternative to assist in helping businesses manage their day-to-day working capital. Steve Bentley, Regional Managing Director, RBS Invoice Finance South West & South Wales QHow frequently do you / your business check your cashflow position? Daily Twice a week Weekly 18% 3% 79% Monthly Quarterly Don t know 1 Having visibility of the current cash position of their businesses is a matter needing daily attention 2 Indicates concern over late payment and cashflow 3 79% of businesses check each day 4 97% of businesses check their cash position at least each week 5 There was nominal variance across sectors and regions indicating that this issue unites all business owners 6 It is vital to provide UK business owners with a robust and effective technology platform to give fast and effective access to their financial position 1 Payment terms are slipping behind agreed terms. The historical norm of an SME being paid within 30 days is changing to days. This can put pressure onto an SME who is managing tight cashflow 2 Those seeking payment within 44 days are the worst affected as only 50% are paid within this time 3 Even if payment terms are extended to within 60 days, there are still 13% that push payments beyond those terms 4 This could cause cashflow problems and is likely to be most common where the business and their suppliers have complex relationships, are working with physical stock rather than service industries and involved with very large organisations / government contracts 5 In the Talking Business supplement, ABFA CEO Kate Sharp talks about the importance for companies to pay their suppliers on time. Visit to read this article and more on how Invoice Finance solutions help 6 Invoice Finance solutions help businesses manage any risks around cashflow by providing funding at the point the invoice is being raised rather than when the invoice is being paid providing the confidence and air cover to carry on running the business while payment is pending The right technology platform is vital to make checking the cash position quick and easy Compared to other Invoice Finance systems we have used, FacFlow is extremely user friendly and provides all of the functionality that we require. Ian Paveley, Ridgeway Rentals The reality is that large companies do not always pay on time, large customers can wield significant power over smaller suppliers, which can manifest itself in onerous contractual terms and lengthening payment deadlines. This can have a significant impact on the liquidity of their suppliers. Kate Sharp, Chief Executive of the Asset Based Finance Association (ABFA) 4 Managing cashflow Managing cashflow 5

4 Q Do your suppliers offer you a discount for paying invoices early? Early settlement discounts Don t know No Yes 6 Managing cashflow 18% 3% 79% Across Britain as a whole, an average 18% of respondents said their suppliers now offer them discounts or other early payment incentives Finding solutions There are signs that businesses have developed strategies to ease cashflow. Early payment incentives are popular, with a fifth of all businesses in London & South East and the North of England being offered the chance to pay early at reduced terms. This falls to just over a tenth in Scotland. Across Britain as a whole, an average 18% of respondents said their suppliers now offer them discounts or other early payment incentives. Perhaps more intriguing is the way this plays out across the business landscape within the following sectors: Courier & Distribution (32%) Pharmaceutical (31%) Legal (29%) Construction & Plant (25%). Early payment discounts are also evident within the Manufacturing, Printing & Marketing, Sales, IT, Healthcare, Food & Drink and Agricultural sectors, but not common practice within the following sectors: Recruitment (5%) Financial Services (7%) Accountancy (8%) Transport (7%) Another view is that on average 79% of businesses are not being offered early payment incentives. Those businesses could have a conversation with their suppliers, but it also points to an area where Invoice Finance can offer meaningful support. Smaller businesses need to make sure their time is spent growing profit not chasing payments. Mike Bardrick, Chief Operating Officer, RBS Invoice Finance We have to make huge financial outlay for stock for our customers in September and may not get back into funds until the New Year. By teaming up with RBS Invoice Finance we are able to bridge the cashflow gap, continue trading and support business growth and investment. Rob Haycock, Managing Director of Kondor, a consumer electronic accessories supplier based in Christchurch, Dorset Getting paid within agreed terms a sector view This analysis shows, by sector, the percentage of businesses who seek payment from their customers within 44 days and the percentage of those invoices that are being settled within that time frame. Sector Terms Debtor days Outside terms / late Within 44 days Within 44 days Beyond 44 days (difference) Accountancy 88% 46% 42% Agricultural 75% 45% 30% Broker 80% 80% 0% Construction & Plant 65% 18% 47% Courier & Distribution 72% 36% 36% Engineering 52% 22% 30% Financial Services 90% 69% 21% Food & Drink 76% 50% 26% Healthcare 88% 63% 25% IT 79% 45% 34% Legal 86% 28% 58% Manufacturing 54% 19% 35% Other 71% 32% 39% Pharmaceutical 85% 38% 47% Print & Marketing Services 58% 21% 37% Private Equity 0% 0% 0% Recruitment 84% 57% 27% Retail 80% 51% 29% Sales 72% 42% 30% Transport 65% 34% 31% Grand total 68% 34% 34% 1 Sectors including Construction & Plant, Courier & Distribution, Print & Marketing Services and Manufacturing are affected the most. Many operate in supply chains that involve government projects and very large corporates who take longer to pay and this then adversely affects the supply chain below it 2 Most respondents (68%) have terms of less than 44 days, but receipt of payments takes longer, with only 34% of clients receiving funds in 44 days 3 There are differences within each sector, with Printing & Marketing Services, Pharmaceutical, Legal, Construction & Plant and Accountancy all having above average differences between terms and debtor days 4 Manufacturing, Engineering and Printing & Marketing Services all stand out as having longer terms than the other sectors 5 Recruitment and Healthcare have shorter terms than other sectors and rely on cashflow being available often they have temporary workers who are paid daily and weekly which drives this need 6 Invoice Finance solutions help businesses manage these gaps as funding is released on the invoice being raised rather than being paid. Please see our contact details on page 22 if you require further information Managing cashflow 7

5 8 Exporting 2 Exporting QDo you export your products and / or services? A regional view The Government identifies exporting as one of its biggest priorities, with the aim of doubling the UK s exports to 1 trillion per annum by This section shows who is exporting and where they are based and highlights some of the issues and opportunities to be addressed. Region Total respondees Respondees that said YES they export Percentage that export North of England % South West & South Wales % London & South East % Midlands & East of England % Scotland % 3 TOTAL 1, % There s never been a better time to trade internationally. UKTI, July UK business is getting back into a position where we make what the world wants to buy. Many companies are doing well, from luxury brands such as Jaguar Land Rover to specialist B2B companies like ROVOP, a manufacturer of remotely operated vehicles. It s about evolving strategy and making growth happen by accessing lucrative new markets. Chris Hawes, RBS Invoice Finance, Director of Corporate A sector view Sectors Total % Exporters Accountancy 24 21% Agricultural 20 30% Broker 5 40% Construction & Plant 69 13% Courier & Distribution 25 44% Engineering % Financial Services 29 38% Food & Drink 72 58% Healthcare 27 30% IT 53 53% Legal 7 57% Manufacturing % Other % Pharmaceutical 13 62% Printing & Marketing Services 59 36% Private Equity 1 0% Recruitment % Retail 55 38% Sales 71 37% Transport % Total 1,566 43% Sectors with the highest level of export These sectors are selling tangible, high value goods, which is welcome news for UKTI and the Chancellor, who have both spoken of the need to rebalance the UK economy and drive manufacturing 1 Businesses across Britain are exporting 2 Tangible, high value goods are desirable overseas 3 Payment delays are the major barrier to greater export success 4 Effective cashflow management can enable a business to move quickly and take advantage of an opportunity 5 Export is likely to be one of the key engines for growth, according to a report from the UK Trade & Investment (UKTI), which stated: There has never been a better time to trade internationally 6 Recent CBI figures show that UK orders and output, including those for export, are at their highest level for two years 62% 62% 58% 57% 52% Manufacturing Pharmaceutical Food and drink Legal Engineering 7 This rise is reflected in our survey, with more than 43% of respondents now selling to customers overseas 8 Activity appears to be strongest in London & South East and Midlands & East of England, where a high 46% of respondents are exporting to other jurisdictions 9 However, a strong export performance comes with concerns around credit control and worries over late payments and cashflow management 10 Invoice Finance solutions can help exporters who are working in multi currencies and who need to release working capital to buy stock or to manage their business while waiting for payment within an international supply chain Exporting 9

6 3 Business priorities With the economy on the brink of change we sought to establish whether the priorities and behaviours of business owners and leaders indicated an increased level of confidence - to build business rather than focus on cost cutting. Confidence is building A year is a long time in business. From the nadir of sliding confidence, falling FTSE 100 numbers and what looked to be an imploding Eurozone, we asked businesses about their priorities for the next 12 months. With optimism creeping back, growth was well represented across the board and in numbers that would have been unthinkable a year earlier. Tellingly, the UK appeared split. Businesses in London & South East, those closest to the now slowly stabilising Eurozone, reported the strongest renewed focus on profit growth, with 62% of respondents placing it at the top of their list. RBS Invoice Finance has provided us with an invoice discounting facility, which is perfect in a growing business as the facility grows with you. It has enabled us to keep a buffer in place, to make sure we are not getting too close to the wire. Richard Grethe, Finance Director at Focus Pharmaceuticals, based in Burton-on-Trent, Staffs Q Please rank the following strategies in terms of importance to your business over the next year: Grow Income, Grow Profits, Manage Risk, Cut Costs and Manage Day-to-Day Cashflow We asked businesses to rate 1 (low) 5 (high) % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Grow Income Grow Profits Manage Risk Cut Costs Manage Day-to-Day Cashflow 1 Another impressive 54% of respondents from Scotland, the South West & South Wales have also made profit growth a priority. Perhaps buoyed by higher quarter-onquarter GDP growth than the overall UK figure, many businesses in Scotland are optimistic, if cautious 2 One quarter of respondents gave Grow Income a top-priority rating, a slightly higher proportion than those in London & South East (22%), yet significantly more than the Midlands & East of England (19%), North of England (19%) and South West & South Wales (18%) 3 Cost cutting is a priority in the North of England 4 However, Scotland also gave Manage Risk the highest priority rating, 31%, which shows signs that caution is still prevailing 5 Similarly, a quarter of respondents in Scotland gave Cut Costs a highest priority rating, while in London & South East this was viewed as a key objective for just one fifth of respondents 6 In fact the importance of cost cutting appears to grow the further north a business is based. Across all regions, about 35% of respondents gave Manage Day-to-Day Cashflow a highest priority rating, which shows that most respondents throughout the UK realise the importance of effective cashflow control 7 With the survey highlighting late payments as a key concern for almost all sectors, Invoice Finance could be uniquely placed to provide much-needed working capital to limit these concerns 62% of respondents in London & South East are focusing on profit growth 10 Business priorities Business priorities 11

7 With Invoice Finance solutions, businesses get the flexibility to invest in growth or to diversify into other activities that might be more difficult to otherwise achieve. Barbara Brown, Regional Managing Director, RBS Invoice Finance, Scotland 12 Supporting growth 4 Supporting growth We were keen to understand the extent to which business owners recognise that Invoice Finance solutions can help grow a business effectively and the level of dialogue with business advisors and intermediaries. QDid you know that Invoice Finance can help you grow your business? No Yes 6% 94% 1 A very high 94% (1,477) of respondents answered Yes when asked if they knew that Invoice Finance would help them grow their business. A total of 79% said they had been discussing Invoice Discounting, Factoring or Asset Based Lending with their accountant 2 The survey paints a picture of business leaders looking to create, capitalise upon and embed growth in their organisations as we enter what we all hope will be a sustained and steady recovery 3 This awareness puts the unique capabilities offered by Invoice Finance at the heart of the UK economic recovery. Businesses across almost all sectors of the UK have a huge amount of value tied up in their sales ledgers, as well as in plant and warehouse stock 4 Invoice Finance solutions are about making that value available, giving the freedom and to strive for strategic goals whether they are large contracts at home or highgrowth markets overseas 5 For small and medium-sized enterprises and corporates, that means shortening the payment cycle, and putting the value in their business to work for them 6 Turning assets quickly can be an accelerator for businesses who want to grow, helping to stabilise cashflow and freeing up employees who are tied up with credit control 7 Invoice Discounting works in a similar way, except the client collects invoices through its existing credit control system. It can be a confidential arrangement particularly important if you have a solid, long-lasting relationship with your customers Q Has your accountant / business advisor ever talked to you about invoice discounting, factoring or asset based lending? Don t know No Yes 79% 6% 15% Helping businesses thrive and grow is the very best part of my job, whether we are supporting a merger or acquisition, helping a client expand their business and provide more jobs or enabling them to buy new machinery or stock to fulfil an order. Being at the sharp end of UK business and being a part of a client s success story gives us all an enormous amount of pride and satisfaction. Mark Clayton, Regional Managing Director, RBS Invoice Finance, London & South East A very high 94% (1,477) of respondents answered Yes when asked if they knew that Invoice Finance would help them grow their business 1 79% of participants recall a conversation with an industry intermediary which underlines the important role that Invoice Finance solutions play in business and the investment made in supporting and building the knowledge base in this area 2 In a recent ABFA survey ( over 90% of 2,500 Chartered Accountants independently surveyed said they believed that Invoice Finance solutions were a good way to enable the growth ambitions of their business 3 The Managing Director of RBS Invoice Finance Martin Morrin has been elected Chairman of the Asset Based Finance Association for 2014 and he acknowledges the value that intermediaries and business advisers can bring to businesses informing UK plc of the options available to manage cashflow, risk and liquidity We were delighted when RBS Invoice Finance decided to work exclusively with our members. The rigour and best practice our members adhere to gives business leaders confidence and peace of mind that they are getting a credible and responsible service. Adam Tyler, Chief Executive Officer, National Association of Commercial Finance Brokers Supporting growth 13

8 5 Sector by sector How Manufacturing, Recruitment, Engineering and Transport in the UK are experiencing recovery Regional differences in export London & South East Midlands & East of England South West & South Wales 69% 60% 68% 58% 73% A more confident attitude This suggests signs of a growing confidence and more encouraging regional trading conditions. Similarly, cost-cutting seemed to be of less strategic importance to manufacturers in Scotland, with just 11% giving Cut Costs a highest rating, compared to the manufacturing national average of 23%. That may be due to many respondents having already eliminated waste and inefficiency from their operations in recent years. Interestingly, investment intentions of manufacturing firms suggest they are looking to the future. The CBI s Industrial Trends Survey showed that investment on intangibles such as product innovation was significantly up and that plans for spending on training and retraining was at its strongest since October Manufacturing North of England Scotland Investment in product innovation Businesses are becoming increasingly aware of the need to upgrade old machinery and boost capacity in order to capitalise on any recovery, and keep pace with overseas competitors. Looking forward, but keeping an eye on cashflow Since the start of the financial crisis, many businesses have been unable to spend on bigticket items such as new plant and machinery, or have simply put off spending while cashflow was so unpredictable. But that means technology last upgraded before the credit crunch is eight years old in John Gribbon, Regional Managing Director, RBS Invoice Finance, North of England Our manufacturing sector responses show that confidence continues to grow in line with increased orders from domestic and overseas customers, with Grow Profits given a highest priority rating by 61% of respondents. Just 22% gave Cut Costs as their highest rating. This view is echoed by a November 2013 CBI monthly snapshot of the sector, The Industrial Trends survey, which showed that growth in output and orders for UK manufacturers was at its highest level since The report described this as evidence of a broadening and deepening recovery in the manufacturing sector, which supports findings from our survey, and adds that rising demand helped boost overall sentiment as well as optimism about export prospects for the year ahead, despite new export orders growing only slightly. Sharp regional differences Looking more closely however, regional differences become apparent. Manufacturers in the North of England appeared to be more likely to check their bank balance on a daily basis (82%), but are slightly less likely (58%) to export than the national sector average (62%). However, this is still significantly higher than the national average across all sectors of 43%. In the Midlands & East of England, manufacturing firms are slightly more focused on cutting costs and daily cashflow management, yet less likely to check their bank balance every day. This shows that Midlands and East of England businesses are staying mindful of financial risk amid trading conditions that remain challenging. In sharp contrast, manufacturers in London & South East are less likely to focus on their day-today cashflow management and are more likely to export than manufacturers elsewhere in the country. This suggests signs of more encouraging regional trading conditions in London & South East. Just for perspective, Apple did not even launch the iphone until June 2007 and the ipad only arrived in Things move fast. And not just for manufacturers, technology and engineering companies, but anyone whose business relies on systems, plant, technology etc. At some point, failing to invest in the future may affect the quality of products and services. John Hunter, Regional Managing Director, RBS Invoice Finance, Midlands & East of England 61% of respondents gave Grow Profits as their highest priority rating 1 Sharp regional differences exist 2 Growth in output and orders for UK manufacturers are at their highest level since Investment on intangibles such as product innovation is significantly up 14 Sector by sector Sector by sector 15

9 2. Recruitment Opportunity for a sector that s strong on cashflow We are very happy with the support we have from RBS Invoice Finance. They have a sensible approach towards our cashflow and fully understand our business. Mike Wynn, Director of C&P Recruitment, based in Edinburgh Our survey indicated that confidence among recruiters continues to grow, fuelled by increasing activity in the market, with more businesses recruiting and more employees willing to move jobs, (both indicators of improving wider economic conditions). Accelerated growth predicted Figures from the latest trends survey from the Recruitment and Employment Confederation (REC), released in November 2013, show the same buoyancy: Industry turnover reached 26.5 billion in 2012/13, a growth of 3.1% since 2011/12 Accelerating growth for the industry of 7.3% in 2013/14, 8.3% in 2014/15 and 9.6% in 2015/16 A prediction that the UK recruitment industry will surpass its pre-recession peak of 27 billion and achieve a turnover of 28.5 billion by the end of March next year With activity picking up it s of little surprise that almost half (49%) of recruitment sector respondents identified Grow Income as their most important strategic objective, compared to an all sector figure of 38%. At the opposite end of the spectrum, London-based recruiters are more focused on Growing Profits, with Cutting Costs and Managing Risk and Day-to-Day Cashflow of less strategic focus than elsewhere. The survey also showed that early invoice payments are more usual in this sector than many others, lessening the likelihood of cashflow pressures. Cashflow is the priority Almost a third (30%) gave Manage Day-to-Day Cashflow a highest priority rating (compared to an average of 38% from all respondents), suggesting that cashflow management is less of a priority for recruitment sector firms. This may be due to the sector s long history of using Invoice Finance and factoring solutions. Early invoice payments are more usual in this sector than many others, lessening the likelihood of cashflow pressures. Only nine per cent of recruitment sector survey respondents named Cut Costs as a highest priority, compared to an allsector figure of 21%, perhaps because businesses in this sector are likely to have far lower overheads than those in manufacturing, transport, etc. In terms of regional differences, Midlands & East of England recruiters are more likely to check their financial position each day, and gave a similarly high score to Cut Costs. This shows a keenness to remain watchful and cost-conscious. Regional differences in export 32% 25% 17% 10% 22% London & South East Midlands & East of England South West & South Wales North of England Scotland A market that has matured Since 2008, activity in the jobs market in London & South East has held up much better than elsewhere in the UK, garnering a higher level of confidence and optimism among recruiters. Scottish recruiters were less likely to check their bank accounts each day, despite ranking managing Cashflow as their second-highest priority much higher than recruiters elsewhere. Commenting on the overall picture for the recruitment sector, REC Chief Executive Kevin Green says: Recruiters are resilient and have been working harder to deliver more for less to costconscious clients. We ve seen the market mature, with consolidation by large and medium-sized businesses acquiring smaller operators. The remaining small agencies have had to carve out specialist niches in order to survive. Recruiters are resilient and have been working harder to deliver more for less to cost-conscious clients. Kevin Green, Chief Executive of the Recruitment and Employment Confederation 1 To grow income is an industry wide priority 2 Early invoice payments are common within the sector, making cashflow pressures less of an issue 3 Consolidation has been significant, with smaller agencies operating within niche markets to survive 49% of recruitment sector respondents identified Grow Income as their most important strategic objective 16 Sector by sector Sector by sector 17

10 3. Engineering Export is strong as businesses look to benefit from BRICs and beyond Annual global output will more than double in two decades, with three fifths of that output coming from developing countries Engineering respondents are marginally more focused on growing profits, with 62% ranking it as having the highest strategic importance. This is above the all-sector national average of 60% and suggests that business confidence and optimism levels are higher than average. One of the most significant survey results is the high number of engineering respondents that are focused on growing income 49% compared to an all-sector national average of 39%. Export is a driving factor They are also more focused on growing profits, with 62% giving it the highest strategic rating, supporting the view that market conditions have improved in the past year. Exports also remain strong, with 52% of our engineering sector respondents selling overseas. In fact a report by Engineering UK, a company that works to promote the engineering industry, claims that export will be a driving factor. It says that annual global output will more than double in two decades, from $78 trillion to $176 trillion and three-fifths of that extra output will come from emerging or developing economies, particularly Brazil, Russia, India and China (the BRIC countries) and other expanding economies. A focus on growing profit Also revealing is the low number of respondents, only eight per cent, giving cost cutting a low rating compared to an all-sector figure of 21%. Again, many firms will already have trimmed costs back. Managing Daily Cashflow also appears to be less of a priority, with only 30% saying this was of highest strategic importance, compared to an all-sector national average of 38%. This might be explained by the fact that credit terms tend to be longer in this sector. Engineering firms in the UK are more focused on growing profits, with 62% giving it the highest priority, supporting the view that market conditions have improved for many engineering businesses. When it comes to regional differences, engineering businesses in the North are more likely to check their cash position each day, ranking Managing Day-to-Day Cashflow as their secondhighest priority. They re less likely to export than engineering businesses elsewhere, but more likely to focus on managing risk. Midlands & East of England-based businesses ranked Manage Day-to-Day Cashflow and Cut Costs higher than engineering businesses elsewhere, yet they are less likely to check their cash position daily. Engineering businesses in London & South East are much more likely to export than their counterparts elsewhere and are more risk conscious, despite being slightly less likely to check their cashflow positions daily. Almost 40% of South West & South Wales-based engineering businesses gave top strategic priority to Manage Day-to-Day Cashflow, compared to a national sectoral figure of 30%. Cutting costs is a much greater priority to South West & South Wales engineering businesses 25% consider it a top priority compared to the national average of nine per cent. They are also more likely to check their cashflow each day than engineering businesses elsewhere. Managing risk remains a priority Scotland-based engineering businesses are more cashflow focused, ranking Daily Cashflow Management as their second highest priority much higher than engineering businesses elsewhere. Cashflow Management attracted as high a rating as Grow Profit (both 55%), yet engineering businesses in Scotland ranked Manage Risk as their highest strategic priority the only sector and region to do so. They are less likely to export than engineering businesses elsewhere in the UK. On the whole, Scottish engineering businesses seem to be much more risk-averse. Regional differences in export London & South East Midlands & East of England South West & South Wales North of England Scotland 77% 64% 50% 40% 38% 1 Engineering firms in areas more affected by the downturn continue to give priority to daily cashflow management 2 Confidence in exporting varies greatly among the different regions 3 Growing income is a sector-wide priority Cashflow Management and Grow Profit results are considered of equal importance by engineering firms in Scotland, with 55% giving them both a highest strategic rating I would not sustain growth without the factoring facility. Cashflow has been tight but RBS Invoice Finance have been flexible and helped me to support the growth of the business. John McKnell, Managing Director at Omnitool, specialists in providing high end machined components, based in Irvine, Scotland 18 Sector by sector Sector by sector 19

11 4. Transport As sector recovery remains weak, cost cutting is key In the Midlands & East of England, 96% of transport sector respondents check their cashflow daily, with Grow Profits given as their highest strategic priority Cutting costs remains a major strategic issue for the UK s transport businesses and they are less focused on growing income compared to other sectors. This suggests that market conditions remain more challenging for transport businesses in the UK. Almost a third (32%) of sector respondents named Cut Costs as of maximum strategic importance significantly higher than the national all-sector figure (21%). This shows that cost control remains a major issue, despite falling fuel prices in Caution remains high Only 21% of respondents gave Grow Income a top strategic ranking, considerably lower than the all-sector national average (39%), although Grow Profits was high at around 60%. Again, this would suggest that owners of transport sector businesses remain more cautious. Transport businesses in the North of England appear to check their cashflow less often than others elsewhere, despite giving daily cashflow management as their second-highest priority. Cost cutting is less of a strategic focus, with only 22% of North of England-based respondents giving it a top rating, compared to a national sectoral figure of 33%. Many will have already taken steps to reduce costs. Growing profit a strategic priority In the Midlands & East of England, a high 96% of respondents check their cashflow daily, with Grow Profits of greatest priority. In the region, Cutting Costs and Managing Risk are slightly less of an issue when compared to the national sector norm. Respondents in London & South East ranked Managing Dayto-Day Cashflow as their second-highest strategic priority, and are more likely to check their cash positions each day than sector businesses elsewhere. This indicates that cashflow management is an important issue for transport firms throughout the country. In the South West & South Wales, Daily Cashflow Management was the overwhelming strategic priority, with 80% of the region s respondents giving it a top rating. Cut Costs and Grow Profits were next, with 60% of South West & South Wales respondents giving both a highest priority top score. More than four-fifths (83%) of South West & South Wales respondents checked their cash positions each day, lower than the sector average (88%), yet slightly higher than the all-sector national percentage (79%). At the other end of the country, respondents in Scotland are least focused on Daily Cashflow Management when compared to those operating elsewhere, ranking Grow Profits and Cut Costs as their top priorities. A high 88% of Scottish respondents gave Cut Costs as a high priority, compared to a national sector average of 32%. Again, 88% also gave a top ranking Grow Profits, compared to a national sector figure of 58%. Regional differences in export 38% 36% 17% 23% 10% London & South East Midlands & East of England South West & South Wales North of England Scotland 88% of respondents in the transport sector in Scotland gave a top ranking to Grow profits 1 Cashflow Management is an important issue for transport firms throughout the country 2 A high number of firms check their bank balance on a daily basis 3 Transport firms in Scotland gave a far higher priority to growing profit, than elsewhere in the UK We have been impressed with RBS Invoice Finance s proactive approach and innovative ideas. The new working capital line really gives us a platform to support further growth plans. Roger Fulton, Managing Director at CSG, a distributor of civil engineering products, based in Salford 20 Sector by sector Sector by sector 21

12 6 Contact details Our experts are here to help you with any further enquiries Notes Enquiries: For information about RBS Invoice Finance please contact your relationship manager, if you are an existing client. Alternatively please contact one of the following: Managing Director: Chief Operating Officer: Scotland: North of England: Midlands & East of England: London & South East: South West & South Wales: Corporate: Head of Marketing: Press and media enquiries: Philip Heelis: Talking Business Talking Business 23

13 RBS Invoice Finance Limited Registered in England No Registered office: Smith House, Elmwood Avenue, Feltham, Middlesex, TW13 7QD.