1.25 million UK SMEs to invest in bricks and mortar

As economic confidence and activity levels grow, the research suggests more than one in four SMEs are planning to expand their existing premises, move into larger properties, or expand into additional locations to meet the increased demand for their products and services.

These investment plans are being made against the backdrop of improving confidence and economic conditions for UK businesses. According to the latest official statistics, capital investment by businesses grew by 9 per cent in the second quarter of this year compared to the same period last year.

According to the Bank’s research, which surveyed more than 850 small and medium-sized businesses across the UK, nearly half believe economic conditions are better for them now than it was a year ago, leading to more than one in three planning to invest in measures to encourage business growth.

Paul Shephard, Director for Business and Private Banking at Clydesdale and Yorkshire Banks, said:

“More businesses are looking to invest and prepare themselves for a period of sustainable growth over the next few years. One aspect of that preparation is an investment in the bricks and mortar from which they operate – factories, offices, and distribution centres – providing security for their businesses and staff and providing solid foundations from which to grow.

“New, refurbished or expanded premises have a number of effects for a business and its employees. By modernising or investing in the working environment businesses can expect to see improved productivity. Having additional space also allows for growth in staff numbers, new equipment or the room to develop new products and services.”

More than a third of all businesses surveyed would consider buying their premises outright if the right funding package was available and large deposits were not required.

One such business that has been supported by Clydesdale and Yorkshire Banks to purchase their premises outright is Metflex Precision Mouldings Limited (Metflex), an East Lancashire-based specialist manufacturing business which produces rubber components for a range of industries.

In 2010 Metflex moved into a new purpose-built factory and offices as a rent-paying occupier but after a period of growth has decided to buy the property outright. Metflex has bought its 37,000 square foot office and factory in a deal worth £2m with 100% finance support from Yorkshire Bank in Blackburn.

The findings of the survey follow the introduction of new lending initiatives by Clydesdale and Yorkshire Banks earlier this year which were designed to support the growth and investment ambitions of small and medium sized businesses. As well as initiatives such as extended loan terms, the Bank has developed funding packages to allow businesses to buy their trading premises, and depending on the circumstances, this could be up to 100 per cent of the premises’ value.

Paul Shephard continued: “Businesses up and down the country are looking to strengthen their position as economic conditions improve. That could be creating jobs, developing new products or targeting new markets.

“Our research suggests that more than one in four SMEs want to improve or expand their premises to provide a strong base from which to expand. This sort of investment will not suit every business at this point in time, but we believe many are looking to the future with sufficient confidence and healthy order books.”

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